Some people see filing for bankruptcy as a setback or failure, yet it also marks the beginning of a new chapter in their financial lives. It offers a unique opportunity to reset and rebuild from a clean slate, making new choices and planning for when unexpected issues out of their control throw a wrench in their financial situation. Today, we wanted to look at a few simple and practical ways to start your new future on the right foot and make positive financial decisions.

Establishing a Realistic Budget

Establishing a realistic and manageable budget is the cornerstone of any financial recovery, especially after bankruptcy. Sticking to a budget forces you to meticulously review your income and expenses, allowing you to realize if financial concerns are once again on the horizon.

Depending on your type of bankruptcy and existing debts, you may still have debts that must be paid off or payment plans to adhere to. Since these additional financial requirements can impose some level of hardship, it isn’t unheard of for those who go through bankruptcy to find themselves in financial trouble if they don’t keep a close eye on finances and financial decisions. Even accidental overspending for a few months may jeopardize your ability to meet these obligations.

Creating a budget also allows for adjustments based on changes in income or expenses. After following a budget for months or years, you may find that you have much more flexibility than you once thought. Over time, this practice of review will become second nature, and you will find that your financial decision-making skills and ability to plan for future concerns are vastly improved.

Building an Emergency Fund

After establishing a budget, building an emergency fund is the next step to preventing future financial issues. Emergency funds should only be used to cover unexpected expenses that have the potential to snowball into large financial problems. When you have this buffer, it can significantly reduce the stress associated with financial surprises and prevent the need to take on high-interest debt in a pinch.

The ideal emergency fund is typically recommended to be enough to cover three to six months’ worth of living expenses. This may seem like a lot, but you can work toward this sum over time. If you leave your emergency fund alone as intended, it will only increase until the point where it is needed. Starting small, perhaps by saving a portion of your monthly income, can make this goal more achievable. Even a small emergency fund that hasn’t reached its peak may help you feel more secure as you head toward a new financial future.

Emergency funds have many practical benefits, but building the fund also encourages the habit of saving consistently – a valuable skill. Sudden financial troubles can occur out of the blue and without time to prepare. Emergency funds provide the buffer needed to regroup and find solutions.

Future Financial Decisions: Planning for Retirement

Planning for retirement is one of the most forward-thinking financial goals to set after bankruptcy, and it may be the final step of the journey. Social security is waiting for most seniors, but this amount is rarely enough. Early retirement planning is the best way to grow a nest egg and secure your future. Given the power of compound interest, even small, consistent contributions to a retirement account can grow significantly over time.

It is often recommended that you start building retirement funds after building your emergency fund. As retirement plans frequently involve stocks, bonds, or CDs, a quick financial issue soon after bankruptcy would mean your money isn’t liquid and available to help. Your emergency can help pick up the slack in those moments without damaging your growing retirement accounts.

Let Us Help You with your Financial Decisions and Future

Bankruptcy can be a great option for those struggling with significant debt, and there is no reason to feel ashamed of the decision to file. Contact Richard V. Ellis today to learn more about your options, how bankruptcy can help, and how you can succeed financially after the fact.