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Tips for spending your money after bankruptcy

On Behalf of | Feb 12, 2021 | Bankruptcy

Filing for bankruptcy gives you the opportunity to reassess your finances and start with a clean slate. Without the pressure of overwhelming debt, you can focus your effort on developing healthier financial habits.

You may feel uneasy spending any money during or after your bankruptcy. However, you will need to pay for daily necessities and honor other financial obligations. As long as you understand the right way to spend your money, you can avoid overspending and reduce your risks of accumulating too much debt again.

Set up a budget

You may have already had a budget prior to filing for bankruptcy. You can use it as a template or you can create an entirely new plan for yourself. The important thing is to look for weaknesses in your old budget to determine how you can strengthen your new budget. According to Money Crashers, consider an all-cash budget. Only spend money on things that you have cash for.

If you have a bad habit of overspending or relying on credit cards, an all-cash budget can help you maintain a realistic perception of the money you actually have. Once you retrain your brain and feel like you can have self-control when you spend, it is time to consider diversifying your spending.

Diversify your spending

The variety of ways available to you for spending money can provide convenience and give you opportunities to establish credit. For example, you could make a purchase using cash, a debit card or a credit card to name a few. When you use your credit card to make a purchase, only do so if you have adequate cash in your bank account to cover the purchase. This will prevent the temptation to continuously spend which can put you at risk of suffocating debt.

When you receive a credit card bill, pay the charges promptly and in full when possible. After you feel confident in your ability to properly use a credit card, you may consider asking your credit company for a credit increase. Using your credit card responsibly is a fantastic way to rebuild your credit score.