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Going through bankruptcy isn’t easy. However, once you receive your discharge or dismissal, and the debt collectors aren’t breathing down your neck anymore, you have a fresh start and a new lease on life. Now, your focus should be to make sure you never face bankruptcy again. With these five budgeting tips, you’ll be well on your way to rebuilding your finances.

Track Fixed, Variable & Irregular Expenses

Fixed expenses are the same every month, such as your car payment and mortgage/rent. Variable expenses occur every month, but they’re not always the same, such as utility bills, groceries, and gasoline. Irregular expenses strike only occasionally, but you still need to be ready for them. These include things like car maintenance costs, holiday gifts, and annual or bi-annual insurance.

Budget Based on Four Weeks of After-Tax Income

Your pre-bankruptcy budget might have been off track if you calculated your monthly income by dividing your annual income by 12. This only works if you’re paid on the 1st and 15th, but most W-2 earners are paid every other Friday. Therefore, your budget should be based on four weeks, not 1/12th of the year. Then, in the months where you receive a third paycheck, put this “bonus” income straight into your savings account.

Automate Your Savings

How much do you want to save? We recommend putting away at least 10 percent of every paycheck into an emergency fund. To avoid temptation, arrange to have this money transferred automatically out of your checking account and into an out-of-sight savings account with each direct deposit. Once you hit $1,000, set a goal to never let the balance fall below that amount again.

Switch to an All-Cash Budget for 3 to 6 Months

Aside from electronic payments on major recurring bills such as your mortgage, car payment, and utility bills, buy everything with cash. This may feel archaic at first, but it’s simply too easy to give in to impulse buys when you’re swiping plastic. With only enough cash to purchase two weeks’ worth of essentials, it’s impossible to overspend. Be sure to banish your credit cards to the bedside table to avoid temptation while shopping. Of course, you’ll want to reinstate them again eventually to start rebuilding your credit after bankruptcy.

Save Up for Big Expenses

Just because you’re recovering from bankruptcy doesn’t mean large purchases are out of reach—you simply need to plan ahead to avoid going into debt. For instance, if you notice the tread wearing down on your tires, set aside a little extra from each paycheck to cover the purchase when the time comes. If you want to surprise your child with a new bike for their birthday, start saving months in advance. Try not to dip into your emergency fund to cover foreseeable costs like this.

If you have any questions or concerns about the impacts of filing for bankruptcy, please contact Cutler & Associates at (773) 360-5802. We specialize in bankruptcies and can offer honest, straightforward answers.

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