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Quick Tip: Starting An Emergency Fund After Bankruptcy

After declaring bankruptcy, you will undoubtedly feel an enormous amount of freedom. Whether you file for Chapter 7 or Chapter 13 bankruptcy, you will sudden have a chance to take control of your paycheck again and make smart money choice.

While it is very important to begin to rebuild your credit and pay your bills on time, the most important thing you can do with your money in the wake of a bankruptcy could be to start an emergency fund. These funds, which you can keep in a separate savings account where it is easily accessible, should be enough money to cover 3-8 months of your expenses.

Your emergency fund could come in handy for any number of unpredictable situations: a medical emergency, a lay-off, a new roof or furnace, a death or addition to the family, or a divorce. Many people declare bankruptcy in the first place because they were not ready for an unforeseeable life event - don't make the same mistake twice. The emergency fund should only be used for emergencies - don't use the fund to pay for travel or large purchases like cars or houses.

Even if money is tight - and it often is after a bankruptcy - try to put away a small amount of money each month for an emergency. Sacrifice a small luxury each day, such as a $4 coffee from your favorite coffee shop each morning, or pack a bag lunch for work. These small changes can add up quickly - and they can save you in the future, when the unexpected events of life take you by surprise.

Once you have 3-8 months of savings, you can re-route the money you were putting in your emergency fund to something else, such as a retirement fund or a down payment on a house.

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