Living on a Cash Basis Going Forward

Life after bankruptcy typically requires more financial discipline for most people than ever before. Gone are the days of happily whipping out a credit card to pay for whatever you want, without thought for the future. By not preparing for the unexpected and living on credit, you got yourself to the point of declaring bankruptcy. Life after it must be radically different.

Create a Livable Budget After Bankruptcy

For what may be the first time in your life, you will need to create a budget to live by in order to create any order in your new life following bankruptcy. It is important to know exactly how much money is needed for the essentials, when payments are due and how to avoid creating a bill and not having the money to pay it. By planning a detailed budget that includes when money comes in and when it goes out you will be able to take control of your finances.

The key to a livable budget is to give yourself some wiggle room. Following bankruptcy, you typically have no remaining credit, or very little, left to access in case of unexpected expenses. Therefore, you should plan for these by creating an emergency savings account. Then create a line in your budget for the amount of money you can spend on entertainment, clothes, travel or just simply for fun. This way you can live by a budget without being constrained and feeling like you are constantly punishing yourself.

Use Cash, Not Cards

Even though you probably no longer have any credit cards, if you have a bank account, you will have a debit card, often with a credit card logo on it, so you can use it as a charge card in those places that don’t take debit. However, until your financial situation is much improved and you have become accustomed to living within your means, you should strictly use cash, not debit cards or check cards. These cards are too reminiscent of credit cards and you can easily overspend with them, leaving insufficient funds for automatic payments and other bills.

A good plan is to take the money out of the bank that you can spend each time you are paid. This includes money for groceries, gas, restaurants, clothing, household items, entertainment and everything that does not automatically come out of your account. By seeing the money that is available and using only it, you will be forced to handle money differently. If you use too much of it in the first half of the period between paychecks, you will quickly learn that it is no fun during the second half when there is no money left.

Pay Cash for Big Purchases

This is a novel concept for many people, but if you want or need big ticket items including furniture, cars, vacations and luxury goods, save to buy them. Plan ahead and put aside an amount each paycheck until you have the money to pay for the item. This is even possible with paying for cars. It takes discipline and patience, but it is credit and character building to wait and save for the things you want.

Lenders Are Not Your Friend-- Before Bankruptcy or After

Lenders of all sorts are not your friends. They are not doing you a favor. They are in a business. They are selling loans. Yes, they want to be repaid, but they also want to make money on the loan. They want you to incur late fees and struggle to pay on time. They want you to carry a balance on your credit cards and overdrafts so you pay them interest for the use of their money. Keep that in mind. They will try to lure you back into using credit, but the wise consumer steers clear of it.

Your bankruptcy should be a turning point in your life. You should use the opportunity to reshape your relationship with money. The past is behind you and now you need to move forward with a plan. Use cash only and leave credit cards and loans behind you.