After Bankruptcy: Adjust Your Spending Habits
Once you've received your bankruptcy discharge, you may feel relief – after all, your debt burden has probably been lifted and you've essentially received a fresh start on your finances. And that's a great feeling. But remember that bankruptcy is only the beginning of your new financial life.
The way you handle your finances in the next few months is crucial to your future financial health.
Luckily, you don't have to know any secret formula or magic trick to improve your relationship with money. In fact, learning to spend less and save more may be simpler than you think.
Where Does All the Money Go?
Have you ever had the feeling that money just leaks away? That you never seem to make major purchases but your cash keeps dwindling? If so, you're likely engaging in thoughtless spending. Too often, we spend a few dollars here, a few dollars there and forget that it all adds up.
But you need to know where your money's going in order to hang on to it. Here's how to figure that out:
- For one month, write down every purchase you make. This may be easiest if you carry a small notebook with you everywhere you go so you don't forget to record everything. And we mean EVERYTHING – vending machine snacks, coffee, bus fare, bills, etc.
- If you have expenses that you pay less frequently than every month, total their cost per year and divide by 12 (to find the monthly cost of such expenses).
- At the end of the month, total up everything you spend.
- Divide your expenses into categories (entertainment, bills, mortgage, food, travel, etc.)
- Look for patterns and areas to cut back. Are you buying a bag of candy at the vending machine every afternoon? Consider buying in bulk and bringing small amounts with you for an afternoon snack. Dropping serious cash for gourmet coffee? Try brewing at home for serious savings.
When your spending habits are laid out in front of you in black and white, it's much easier to find patterns than when you rely on your memory.
Once you know where your money disappears to, you're ready to work out a budget to help you hang on to more of your dough.
Quick Ways to Cut Spending
Not coming up with any ideas for cutting back? Consider some of these common saving strategies:
- Buy generic brands (rather than name brands)
- Carpool, walk or ride a bike to save money on gas
- Pay bills online to avoid buying stamps
- Trade fancy cable packages or super-fast Internet for less impressive packages
- Rent movies rather than going to the theater – better yet, rent them from the library (often free!)
- Ditch gym membership to work out outside or at home
- Make lists when you shop and stick to them (to avoid impulse buying)
- Make food at home – if you're always rushing, consider preparing single-serving portions on the weekend that you can grab and go
- Invest in energy-saving light bulbs to lower electricity bills
Why Do You Spend So Much?
Dieters may have heard the expression "emotional eating," and most of us have turned to “comfort food” at one time or another. And psychoanalytic research has suggested that shopping, too, may have emotional roots for many Americans.
After all, shopping and spending money have a variety of emotional causes:
- The holidays, when we feel compelled to show our love by emptying our wallets
- Commercials and ads that insist we'll be happier or more fulfilled if we purchase the latest product
- Children, whose needs and wants we like to meet to express our devotion
- Boredom, which can be staved off in dreary months with a spin at the mall
Compulsive spending – that is, shopping to relieve anxiety or loneliness, then growing more worried when bills come in, then shopping to relieve the renewed loss of control – can be a dangerous cycle.
Because researchers have recognized compulsive shopping as a legitimate addiction like alcoholism or gambling, you may be able to get help through your health insurance or an employee assistance program.
Remember: you can control your finances, and the resources available at Bankruptcy Central can help. Make a commitment to improving your relationship with money and stick to it!
The next step is developing a budget...
The above summary is not legal advice. Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.