Creating Your First Budget After Bankruptcy
Everyone needs a budget, not just individuals who have filed for bankruptcy. But developing that first budget after receiving a Chapter 7 discharge can be a little tricky. You’ll need to focus on avoiding getting into any more debt and living well within your means so that you can build up an emergency savings fund.
Calculate how much money is coming in.
The first step is to figure out how much money you’re receiving each month. For many people, this is as simple as taking a look at a paystub. Your situation might be a little different, however. Consider whether you have income from any of the following sources:
- Child support
- Alimony
- Interest and dividends
- Structured settlement
- Public benefits
- Side gigs
While you’re taking a closer look at your income, consider how you might boost it. Could you get a second job? Sell your handyman services? Rent out a room in your home? Taking temporary measures to boost your income will help you build your emergency savings.
Figure out where your money is going.
The good news is that after your bankruptcy discharge, you won’t have as many monthly bills. You shouldn’t have to worry about credit card bills or loan payments, but don’t take this as a license to spend more. Write down all of your monthly and annual bills. Then, write down everything you spend money on during the course of a week, including gas or bus fare, groceries, pharmacy co-pays, and lattes. Add it all up and multiply it by four to estimate your day-to-day spending for an average month.
Reconcile money out with money in.
Compare your income to your bills and daily living expenses. How much is left for your emergency savings and long-term saving goals? If there isn’t much left, or if your income won’t cover your expenses, you’ll need to figure out where you can cut expenses.
Here at Cutler & Associates, Ltd., we’re committed to helping you achieve financial stability. Our bankruptcy lawyers in the Chicagoland area will answer all of your questions and offer thoughtful legal guidance tailored to your unique situation. Call our law firm in Aurora or Schaumburg at (847) 961-4572.