Bankruptcy is a form of financial relief that many people rely on for a fresh start. The lure of discharging debt or entering a more favorable repayment plan might seem advantageous to some, especially if their situations are the result of uncontrollable factors, such as income or job loss, financial emergencies, etc. However, to realize the full benefits of Chapter 7 or 13 bankruptcy protection, petitioners should work on factors they can control to prevent overspending.
Overspending is a common concern for many families, especially those who are struggling to maintain a steady level of income or unexpected expenses. Debtors who neglect to improve their financial habits are at risk of having to file for bankruptcy again in the future.
Identify bad financial behavior
Erroneous spending habits are like kryptonite to debtors. Once the overspending starts, it can become hard to stop. Identify spending triggers and implement strategies to avoid them. For example, people who wind up with large amounts of credit card debt should assess their use of credit and reserve the cards for absolute emergencies if possible. Instead of relying on credit cards for purchases, use cash. Or, if the issue involves excess/nonessential expenditures, debtors should consider limiting their spending power to essentials.
Track all spending and budget accordingly
It is not easy to identify problematic financial areas without taking into account all spending activity. Tracking all financial activity makes it easier to see wasteful expenditures and poor spending habits that may require improvement or more oversight. After identifying bad spending habits, it is important to create a budget that details how every dime is spent.
Learn to save
Most people who find themselves in dire financial straits have little to no savings. People who have savings can use them to ride out short-term financial storms. Saving requires a conscious effort of setting aside a certain amount of money each paycheck or month in a separate account.
Debtors should periodically assess their financial activity and make improvements as necessary to protect themselves from the pitfalls of overspending.