Hooray!!! You finally got approved to file for bankruptcy. You think the coast is clear and you can start all over again. You hit hard times and made some bad spending decisions and you definitely need a fresh start. You lost pretty much everything that couldn’t be salvaged thru bankruptcy court. You still have to pay some school loans and taxes that you owe and you can keep the car, but that is the least of your worries for now. But did you actually change your financial habits? Don’t get me wrong there are people who file bankruptcy because of sudden medical bills, illness, loss in the family, accidents, divorce, etc. that were financially stable until the inevitable and unexpected occurred. This doesn’t apply to them. I am speaking to the “excessive credit card user, name-brand buyer with the government assistance, gamblers, late payment senders, got nice clothes and cars but living with mom because of no credit or savings, and rob-Peter-to-pay-Paul” people who haven’t gotten the picture yet. Yes, I am talking to you. When are you going to learn?
Many people file bankruptcy and feel that it is the kill all; fix all to their problems. The feeling that you have cleared the walkway of your bad spending habits and can start anew is almost like saying that you will remarry your cheating ex-husband/wife with the same issues as before. It never works!!! If you do not actually take the steps to become financially responsible; then you will continue to find yourself in the same boat years later simply because you refuse to give up habits and/or addictions that cause you to fall back into damaging water. Bankruptcy doesn’t erase the way you handle money and financial responsibilities. Bankruptcy doesn’t correct the way you choose to spend your money. YOU are the person who has to fix YOUR spending habits and mindset. Trust me when I tell you that you can find yourself back to square one all over again-and-again-and-again!!! If you continue to be unwilling to change your spending habits in order to sacrifice a stable financial situation; then you will continue to live paycheck-to-paycheck and/or poorly. Get out the mindset of “I must have it RIGHT NOW”!!
If you do not have your finances in order; you definitely need to follow these steps:
- Set a reasonable monthly budget and stick to it!!! Stop spending money on things that aren’t necessary. Some people feel that they must have cable, entertainment, gamble, shop excessively at the most expensive places, eat out, and get new vehicles. If your monthly finances do not incorporate actually saving at least 10% of what you bring in after all your important and necessary bills are paid; then that is a problem. That’s what it means to “pay yourself first”. You should not worry about miscellaneous and entertainment when you aren’t financially stable. You should not continue to eat out or buy lunch each day when you have messed up your money. That is not a priority at the time. You definitely should not be shopping at Wegman’s and Whole Foods when you have Kroger’s and Aldi’s money. You damn sure shouldn’t be purchasing Michael Kors with Walmart finances. Most financial irresponsible people do not recognize the differences between what is a need and a want. The little things concerning your money matters. When you have the opportunity to save that little bit of money you spent on outfits and shoes; you should always take it!! That takes me to the next step.
- Learn and become familiar with what is actually a need and a want. We all need food, shelter, water, and clothing. We do not need filet mignon, mansion, champagne, new cars, and red bottoms. You have to learn how to build your credit and money back to a manageable place without worrying about things that do not uphold value or substance. We all like to treat ourselves and purchase things we want, but remember if you aren’t financially stable and on the road to FULL financial recovery your wants don’t matter. I know you don’t want to hear it and it’s your money, but if you want to save and get out the hole you constantly get into; then you have to discern the difference eventually. Do not make hasty decisions when you are living paycheck-to-paycheck. Stop telling yourself, “I am going to spend this money because I have it right now. It’s just a little something that makes me happy”. Start telling yourself, “How can I begin to save this extra money to free myself from future debt and gain financial freedom”. It is always cheaper ways to do things. You may “need” a new car because it is wrecked, but you can fix the clunker you already had parked in the garage. You don’t need the luxury car. Stop investing in a bunch of material things that depreciate instead of your financial future. You may need shelter, but you can get an apartment that has cheaper rent instead of renting a house!!! Put your ego to rest.
- Do not fall into the debt trap!!! Stop going to payday loans, rent-a-center, and other predatory institutes to get out of or into situations. These institutions do not offer great rates. They also will not get you out of debt. Stop borrowing money from people to pay your bills that you weren’t responsible for paying for in the first place if you are still out and about enjoying trips and events. That includes putting things on credit!!! You can save that money and use it where it is important. Remember the people who you took or borrowed money from are watching how you handle yourself financially. This will burn a bridge eventually. Especially if you didn’t pay them back. If you need to downsize your home in order to decrease debt; then do so. If you need to catch the bus; then do so.
- Learn how to manage your finances and stop being prideful!!! I was having a conversation with one of my good friends and this topic came up with why so many people live in poverty or have bad financial habits. Many families haven’t taught their children how to save and manage money; therefore they do not make rational decisions concerning their financial future. This creates an ongoing cycle. In most cases, many people make financial decisions solely on what makes them happy at the moment. Many people aren’t familiar with what credit is or the importance of establishing it; therefore they create unnecessary debt. This is why it is so important to read, discuss, and/or take classes concerning personal finance. Remember, the main reason you are in debt or not financially strong is because you spend more than you actually have. You have to learn how to spend less to live. I used to be on Section 8 and welfare in my twenties. I worked three jobs and my assistance was cut. I knew I had to save my food stamps instead of selling them because it was going to cease. I couldn’t get a house when I wanted it because I had to build credit. I had no idea what credit was until I actually moved into my own apartment without a co-signer. I had to move into an apartment that was within my bank account and the paycheck. I couldn’t get my hair and nails done like I wanted to. I couldn’t go to Jamaica or Mexico with the crew. I wouldn’t dare use my credit card to buy clothing, groceries, or fast food. I had to eat crow for a while until I got on my feet. That gets me to the last step.
- Invest in things that will appreciate and build your credit. I saved my money for a year until I built up my credit and savings. That’s when I decided to purchase my first home. I didn’t purchase a home that was approved for the maximum amount. I bought a home that was less than what I was approved for. I bought a home that needed some TLC and the opportunity to make me some equity. I made $30,000 off the sale of my first home and I used that money as a down payment on my other home. I did the same thing with my second home and made $50,000 that I rolled over to my current home. Not only did I build excellent credit, but I created a magnificent nest egg for my family and me. I not only have land but a home that is building equity as well. The extra money I saved and made is building interest!! Now I can enjoy the fruit of my labor. It may have taken years to get thru, but I did it. So can you once you change your mindset.
Remember that in order for you to get financially strong, you must change the way you think about money and finances. Stop trying to regain what you have lost via bankruptcy or lost so soon. You do not have to get another new vehicle and house because of what you’ve lost. You do not have to prove to the world that you have it all together when you don’t. Take the financial hardship as a lesson and adjust accordingly.