Filing for bankruptcy can provide you with the relief you need when your debt gets out of control. Essentially, bankruptcy allows you to start over.
Use this fresh start wisely and avoid making the same mistakes. These tips can help you take charge of your finances.
Create a budget
A budget helps you balance your financial obligations and understand where your money is going each month. There are numerous tools out there to make the budgeting process easy, including apps that link with your bank account.
Build up an emergency fund
According to CNBC, 65% of U.S. households do not save much or any of their annual income, and the Federal Reserve reports that 35% of Americans would use a credit card to cover a $400 emergency expense.
Without savings, you are more likely to turn to a credit card for unexpected expenses, such as a car repair or medical bill. Put aside money from each paycheck into a savings account. Over time, you can build up an emergency fund that you can tap into for those unanticipated costs.
Improve your credit
While bankruptcy will take a large toll on your credit, there are steps you can take to rebuild, including:
- Take out a secured credit card or credit-builder loan
- Become an authorized user on someone else’s card
- Utilize tools that report on-time phone and utility payments to the major credit bureaus
The right plan for getting your finances under control after bankruptcy will depend on your unique circumstances, but all people can benefit from making payments on time, evaluating spending habits and prioritizing financial health.