Post-Bankruptcy Advice

The banking process can be a great tool for debt relief. However, it should be used responsibly. That is to say that once you have gained financial freedom, you should take to heart some of the important lessons learned during the process.

Your Financial Future

Although most bankruptcies are not taken about solely by frivolous spending, the truth is that many of us could use help learning to manage our money better. In fact, having an adequate savings and budget can prevent debt problems when financial hardship strikes. One of the most valuable aspects of the bankruptcy process is the training acquired in a credit counseling course. Once your debts are relieved, it is up to you to put these skills into practice.

Start by evaluating your necessary expenses and create a budget. It is important your budget have a place for all categories of spending, including entertainment, meals and clothing. If you do not set a budget for things like going out to eat, buying Starbucks or attending a movie, you'll find it easy to overspend in these small areas. You should also include a category in your budget for any current, or future, debt accounts. After all, these payments are one of the essential expenses.

Second, beef up your savings. Most people have less than $ 5,000 in their personal savings account. When the unexpected happens, this is never enough to help cover expenses. A good rule of thumb is to have at least three to six months worth of your essential living expenses saved in the event of financial hardship. Having this buffer can prevent you from missing payments or going hungry while you work to resolve your financial trouble.

Once you have some better money management skills in place it may be time to look for new credit. However, credit should now be used as a tool for rebuilding a positive credit reputation, and not for convenient spending. The key is knowing the difference in good debt and bad debt. Good debt is that which works for you, boosting your credit score. This can be achieved by keeping your balance under 40 percent of the total credit line. Carrying a balance higher than 40 percent can be detrimental to your credit score, working against your post-bankruptcy mission. Making timely payments and patience in the credit game are also crucial for your financial success after bankruptcy. Do not get in over your head or take out multiple credit lines until you have successfully maintained payments on one or two lines for at least six to twelve months.

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