Budgeting After Bankruptcy

Whether you’ve been through chapter 7 or chapter 13 bankruptcy in Ohio, coming out of the other end of the process can feel grim. Sure, you’re out from under the heavy weight of debt, but where to go from here? How can you begin a path toward credit recovery and establish a positive relationship with money moving forward? At Hausen Law, Ohio bankruptcy attorney James Hausen and his experienced team of legal professionals understand the hurdles you’re up against, and they’re here to help, with practical tips and useful tools.

What Is a Budget?

Yes, this is a pretty basic question, but it’s likely that not having hard and fast rules, paired with some sort of financial emergency may have contributed to the financial issues that led to your bankruptcy. So let’s get back to basics. The key lies in knowing exactly where your money goes each month–it’s the first step to avoiding future financial trouble and moving toward long-term financial health.

A budget lays out every single financial commitment you have, along with potential expenses, and makes a responsive plan to keep money flowing where it most needs to go. To accurately determine monthly expenses, you can divide financial responsibilities into categories, such as:

• Rent / Home Mortgage
• Utilities
• HOA or other recurring service fees
• Cable TV / streaming services / internet / cell phone service
• Groceries and cleaning supplies
• Clothing and toiletries
• Gasoline 
• Charitable contributions
• Insurance premiums
• Alimony / spousal or child support

Other expenses may not occur monthly, but still need to be taken into account. These might include:

• Home maintenance
• Medical expenses
• Auto maintenance and registration
• Property Taxes and Insurance 

Besides these common household expenses, you may also have additional financial obligations or responsibilities, including:

• Lunch money for work or school
• Public transportation fare
• Tuition and school supplies
• Childcare
• Storage rental
• Pet care supplies / veterinarian visits

Now you need to figure out total take-home pay and compare it to your monthly expenses. Once all of these costs are listed out, it’s easy to see that there are a lot of ways that your money is spent every month! It is also the ideal time to find specific ways to cut down on the amount of money that is going out, especially since after the bankruptcy filing process is over you could be temporarily limited in funds. If you filed for chapter 13 bankruptcy then you will also need to factor in your repayment plan.

After you have your income and expenditures solidly nailed down, it will be clear where adjustments can be made to improve your financial situation. There are countless schools of thought on how to best organize your budget, but they’ll all agree that having a clear picture of how money flows in and out of your home each month is the first step. You may even want to group the above common expenses into broader categories and determine what percentage of your income they represent. Commonly recommended percentages are:

• Housing: 25-35% of total monthly income
• Utilities: 5-10% of total monthly income
• Transportation: 10-15% of total monthly income
• Healthcare: 5-10% of total monthly income
• Food: 5-15% of total monthly 
• Charitable Giving: 5-15% of total monthly income
• Entertainment/Recreation: 5-9% of total monthly income
• Miscellaneous/Personal: 2-7% of total monthly income

The reason that percentage ranges are given is that you will naturally have fixed, variable and irregular expenses. Fixed expenses don’t change from month to month, while variable expenses do change, and you may also have irregular expenses, like gifts, medical expenses, or bills that are paid annually or semi-annually. Taking a snapshot of your finances with the lens zoomed way out can help you to get a comprehensive view of where you could make adjustments or do a better job of planning in advance. Depending on your financial situation and habits, investments, savings and debt payments could also be factored in. 

Budgeting Tips and Best Practices

Once you have the numbers crunched, that’s just the beginning. To be successful at making your plan work, there are some key practices you should adopt. 

Find your “why” – This is the most important factor when it comes to budgeting after bankruptcy. Without a clear purpose, a goal that seems hard to achieve can be a struggle to meet. Whether it’s to be in a financial position to purchase a home or a vehicle or any other number of meaningful goals, having your sights set on this ultimate destination will help you to stay on track. Write down your “why” and stash reminders around the house in unexpected places to help keep yourself motivated.

Stay positive – It feels great to free yourself from debt through bankruptcy–keep a good thing going. Get excited about organizing your finances and focus on the positive ways it will better your life. Instead of a dry term like “budget,” why not get creative and work on a “Wealth Management” plan or your “Path to Prosperity.” Don’t look back at mistakes other than to learn from them, and focus on the journey ahead!

Set attainable goals – Simplify your budget as much as you need to so that you can keep track of everything but aren’t overwhelmed to the point of quitting. This isn’t the place to compare with others, just focus on doing better than you’ve done previously. Budgeting is a highly personal endeavor, after all. Be honest with yourself and move forward with confidence.

Be flexible – Being too rigid with your budget could make it very hard to follow it successfully. If one month sees unpreventable higher costs in one category, find ways to adjust another category to make up for it. Aim for being comfortable with where you are financially, and keep refining your plan until you get there. Stay limber and nimble and be willing to reassess and reevaluate the budgeting decisions you've made in the months and years to come.

As you make and work toward financial goals, keep these pointers in mind:

• Make your goals specific and measurable, with clear amounts and dates attached
• Set attainable goals that are realistic and within reach
• Set goals that are relevant to your ultimate financial vision
• Attach a timeline to goals to stay engaged and on track
• Have patience and remember that recovery from bankruptcy is a journey

Focus On Credit Recovery

Now that you’re set up for budgeting success, consider moving on to rebuilding and repairing your credit score so that you can better achieve your long-term financial goals. This can range from strictly adhering to payment due dates and obtaining a secured credit card to becoming an authorized user on a trusted friend or relative’s account and seeking credit counseling. There are plenty of tools and habits you can put into play to reach your goals. At Hausen Law, we offer a 720 credit recovery program that is a tried and tested way to get there faster. Together we can help you to rehabilitate your credit and work toward building your financial future. When you’re in control of your finances, a credit score in the 700s doesn’t feel like an unattainable goal.

Get Your Bankruptcy Questions Answered By an Experienced Bankruptcy Attorney

If you’ve filed for chapter 7 or chapter 13 bankruptcy and are wondering, “what’s next?”, it could be time to consider working with an Ohio bankruptcy lawyer who focuses on credit recovery. James Hausen and his experienced team of legal professionals can help you to determine the best course of action. Give us a call or fill out our online contact form and we will be in touch. Hausen Law is happy to serve all of Northeast Ohio, including the Akron, Canton, Cleveland, Wooster, Dover/New Philadelphia, and Youngstown communities. Contact us today to set up a free consultation.