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Spending Your Money After Bankruptcy

In the days, weeks, and months after declaring bankruptcy, your life will change - and not just your financial life. Your phone will stop ringing, you won't fear your own mailbox, and, suddenly, your income is yours again. After months or years of not having control of where your money goes, you are back in power.

However, there is also a lot of work to be done - you are responsible for two major aspects of your financial life after a bankruptcy: 1) reestablishing your credit and 2) making sure that you do not get into a bad financial situation again. What should you spend money on, and what should you hold back on? How can you keep from having another financial problem down the road?

· Save. Immediately start an emergency account incase of a job loss, medical emergency, or other unforeseen financial problem. It may be hard to put away money when you aren't use to the practice - to make it easier, take the amount of one old monthly credit card payment and put it into a savings account each month. It will be rewarding to watch the amount grow instead of disappear.

· Cut back expenses. Just because you have money to spend doesn't mean that you should add luxuries to your life immediately. Even if you want to rebuild your credit through making smart purchases, and even though you now have a paycheck to spend, don't go overboard. Think twice before spending much money on unneeded clothing, entertainment, or travel, for example.

· Get a credit card, but use it sparingly. Using credit is vital to reestablishing a higher credit score and showing your ability to be financially responsible. Don't spend near the limit of your credit card, and be sure to pay it off each month.

· Write out a budget. Although you can't predict all of your expenses in the future, make a concerted effort to leave within your means. Knowing exactly where your money goes will help you save and make sure you will be secure down the road.

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