Bankruptcy provides individuals and families the opportunity to start over fresh on a new financial footing. The stress of debt and the harassment of debt collectors is behind them.
For many, there is a new challenge: making new habits and financial decisions that will protect them from ending up back in the pit of debt.
If you find yourself trying to form new habits and financial practices, your first priority should be to develop a budget. This is the foundation of all sound financial decisions and the surest way to avoid significant debt in the future.
“Budget” is often a bad word to people, bringing with it mental images of eating stale peanut butter and jelly three times a day. It doesn’t need to be like that.
Here are a few practical tips for starting a budget – and sticking to it.
Track your spending now, before you start the budget – Take a close look at how much you spend each month and what you’re spending it on. You may be surprised to see how quickly daily lunches add up or how much you’re spending going out. Be honest with yourself about where your money is going.
Make a list of priorities – Things like rent, cellphone, insurance and grocery bills must be paid. These expenses go at the top of the list. Write down everything you absolutely need. From there make a list of the things that you’ve previously been spending money on decide what can be eliminated. Be sure to differentiate needs from wants. Again, be honest with yourself.
Add up the numbers – Write down the exactly amount you will spend on each item on the list. Be sure to include a small monthly slush fund for unexpected expenses.
Save – Make automatic deductions for savings. Many people have skipped this step for years of being in debt. Make sure you save enough to have an emergency fund.
Pay in cash – Many of your expenses will need to be paid by check or online, such as rent or insurance. As much as possible, however, pay in cash. Take out the amount you’re allotted for the month. This will help you visualize how much you’ve spent already and how much you have left. It also helps you avoid the temptation of putting it on a credit card and going over your limit.
At McBride Law Firm, we provide resources for individuals who find themselves buried under debt. We are committed to helping our clients find debt relief and escape the stress.