Bankruptcy doesn’t have to be as scary as it sounds. While it’s true that bankruptcy is a low point for your finances, it also gives you the opportunity to start rebuilding your credit. Taking the right steps will lead with you ending up better than you were before.
Rebuilding your finances after bankruptcy requires building new financial skills. If you approach your finances, in the same way, you’ll end up in a similar position. Use the following four suggestions to your advantage and rebuild your finances!
1. Don’t Shy Away From Using Cash
Getting in the habit of using cash is one of the most important habits for rebuilding your finances. Cash is defined as money you have in your bank account or physically in your hand. If you’re borrowing from a line of credit or credit card to fill your account, then you’re not using cash.
A great first step is setting up some automatic withdrawals for your bills. Important payments like your mortgage, phone and utilities should come directly out of your bank account. Not only does this save time, but it also develops the habit of taking care of your expenses first. Setting up automatic withdrawals also gives you an accurate, visual representation of your finances when you look at your bank account.
2. Get Into The Habit Of Making A Budget
No matter how you slice it, if you don’t have a plan for your money your money is going to manage you. Without a budget, you’re constantly playing catch up your finances. You’d be surprised how much money you have to enjoy yourself when you budget correctly.
After declaring bankruptcy, make sure you take your credit counseling sessions seriously. These sessions allow you to access knowledge directly from financial experts. These counseling sessions are useful for learning new budgeting techniques. Learning how to budget is the first step in taking control of your financial future.
3. Make Sure You’re Saving Money
Regardless of the amount you owe or how bad your finances are, you absolutely need to start saving money. After filing for bankruptcy, stay away from financing anything or entering an agreement where “all applications are approved.” If you want control of your finances back, you need a healthy reserve of savings.
One of the ways you can prove your responsibility with money is by consistently contributing to RRSPs and TFSAs. It’s a good idea to set up automatic withdraws that are adding to your savings. You’ll surprise yourself with how much money you can save in just half a year if you take your saving seriously.
4. Start Rebuilding Your Credit
If you’re ready to trust yourself with credit again, a personal line of credit is an excellent place to start. Getting a secured loan from your bank is a relatively low-risk way to start building credit again. Keep in mind that the interest you pay is way more than the interest you earn on your savings. You should only begin rebuilding your credit after establishing your savings plan.
Getting a good credit card is also great for rebuilding your credit. However, if you start using a credit card again, you’ll likely end up in a similar position as before. One thing you can try is only using your credit card for specific items, like gas. Limiting your use makes it easy to pay your balance in full each month. This is an excellent way prove your responsibility to financial institutions without taking on unnecessary risk.
All in all, rebuilding your credit requires a whole new approach to your finances. Using cash, making a budget and saving money are must-have essentials for a healthy financial outlook. Use these four suggestions to help you bounce back from bankruptcy!