Once my client’s case is closed by the bankruptcy court, I hope I never see him again. The primary purpose of bankruptcy is to provide a fresh financial start, and my hope for all of my clients is that they take advantage of this new start. That requires work on their part, and the one thing I always give my clients one piece of advice after their case is closed: make a budget.
The best thing my clients can do after they file bankruptcy is to create a budget. A budget will create a framework for your finances and help protect you from any unexpected expenses.
If you need help in creating a budget, follow these steps.
- Gather every financial statement you can. You can’t create a budget if you don’t know where your money is going. Make sure you include everything. You might not think about things that are being deducted automatically from your checking account, like your cell phone bill, so review your bank statement.
- Record all of your sources of income. Ultimately, this provides the foundation for your budget. If you spend more than you earn, you will find yourself underwater again before you know it.
- Total your monthly income and monthly expenses. Just like it says. You might be surprised where your money is going, but you won’t know until you put it all together.
- Make adjustments to expenses. If you have more expenses than income, something has to go. That might mean fewer meals at restaurants or losing the premium channels on your cable package.
- Review your budget monthly. This is key. Budgets are living documents and may need to change from time to time. It’s not enough for you to just come up with a budget and then stick it on the refrigerator. Compare it to your bank statement every month to see where your money has gone.
Of course, there are a lot of factors that lead to bankruptcy which you might not be able to control, like losing your job, needing surgery, or even going through a divorce. However, creating a budget that includes savings may help you get through times like these.
If you need help keeping track of your money, try some free online resources, like mint.com.
Remember a bankruptcy firm can only help you through one part of your new financial start, the rest is up to you.
