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How to balance your budget after bankruptcy

On Behalf of | Mar 4, 2020 | chapter 13 bankruptcy, chapter 7 bankruptcy |

When you file for bankruptcy, you can get your finances back to square one. However, once you file, you cannot file again for a set number of years after your discharge. This means that you need to be very careful with your finances. You have to create a budget and stick to it.

Creating a budget means balancing your expenses and income so that you make equal to or more than your expenses. U.S. News and World Report explains that you should begin by looking over your finances. Figuring out your fixed expenses, such as your bills, is fairly easy because they are generally the same month to month. However, you also need to calculate other money that you spend. This may take a few months of tracking your expenses.

Building a budget

Once you have all the information that you need to accurately forecast your income and expenses for each month, you can start to work on your budget. There are plenty of tools you can use. The easiest is a simple spreadsheet.

You want to input all your income and expenses, calculating them to see if it all balances. Most people will see an imbalance the first time they set everything up. Typically, results will show that people spend more than they bring in. If you are lucky enough to spend less than your income, then you are in a position where you can put that extra money into savings.

Balancing the budget

If you are like most people and spend more than you make, you will have to start adjusting your expenses to balance them with your income. You probably cannot adjust fixed expenses. For example, if your rent is $600 a month, then you probably cannot talk your landlord into reducing that to $400 a month. You will need to find somewhere else to reduce your spending.

The most recommended place is with your other expenses, such as food, entertainment and travel. You need to keep adjusting until your budget balances.

The most important thing is that once you have a balanced budget, you need to follow it. You must not deviate, or else you could end up in financial trouble again.

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