LIFE AFTER BANKRUPTCY: Common Sense Advice for Post-Bankruptcy Clients

Most bankruptcy clients- well over 90%- are filed by normal people who’ve experienced severe life distress.  Such clients really have no choice but to file as their lives have spiraled out of control after job loss, health challenges and family issues.

Our hope -and a primary goal around our office- is that after filing bankruptcy we want to see our clients experience a true and meaningful fresh start.

Toward that end, at least some of our internet blogs should be about continued financial education, encouragement and instruction.  We also would like to assist our clients to understand and appreciate ways to avoid some of the more common financial mistakes many of us make.

1. Rainy day saving (emergency fund).

A common reality is being boxed into a position where for years we live paycheck to paycheck.  By the end of a pay period, there’s nothing left.  Even the smallest additional need or crises then requires credit spending for even everyday needs.

Aggressive and predatory lenders- such as payday lenders, credit card lenders, and a whole new growing group of internet lenders- make enormous sums of money off those still within that paycheck to paycheck box.

Although no one really wants to file bankruptcy, we find that filing can often provide our client with the freedom to finally draw a line in the sand to begin anew with such saving practices.

At Kerry Hettinger PLC, we strongly encourage the practice of saving even a small portion of one’s income each payday for future needs.  Rather than saving for a new TV or even for a vacation, the rainy day fund is set aside for true emergencies.  When forced to use this fund, one then sets as a priority the goal of repaying the fund as soon as possible.  The goal is to never need to borrow money for basic living expenses again.

2. Proper use of credit cards.

The focus then is on avoiding borrowing for basic living expenses.  It would be “pie-in-the-sky” thinking to say one never again needs to rely on credit.   “Life happens” and sometimes we all face situations where we have no choice but to put certain expenses on credit. Medical emergencies arise, car emergencies pop up, and we simply don’t have the money in the bank.

However, even in these reasonable uses of credit, maximum effort should then be expended after the emergency is resolved to pay off such expensive credit debt.

Again, the message we wish to get across is that using credit to cover everyday expenses or for unnecessary shopping, leaves us vulnerable to even the slightest bump in the road we call life.

3. Living with a budget.

In assisting our small business clients, we often marvel that even sophisticated small business clients often don’t use or follow a budget.  If our small business owners often don’t use a budget, it’s then not so surprising that we don’t generally use or follow budgets in our own households.  However, when you think about it, our households are small businesses of a sort.  And just as it can be frivolous and dangerous for a small business to live without a budget, just so it is risky for us to living without basic budgeting in our households.

One of the most valuable things we do in the intake and signing meetings with our bankruptcy clients is to go over their budgets.  As many of you know, the financial education courses required in the process also require much attention to personal budgeting.

4. Track all spending.

Together with budgeting it is then critical to observe and reflect on our actual spending habits. This can be accomplished as simply as examining the bank account on a regular basis. The goal is to take a long hard look at what we’re spending and how we’re spending.  Small, seemingly insignificant purchases can add up quickly. That “quick stop for coffee” may only be $5 per day, but if you’re stopping every day of the work week, that quickly adds up to an extra $100 per month. A $10-$15 lunch doesn’t hit your bank account hard when you do it once, but eating out 3 times per week could run as much as $180 per month. Looking at the numbers as a whole can give you a better understanding of where your money is going, and that can be the incentive you need to get back on track.

5. Buy only what you need (distinguish between “wants” and “needs”).

Whether it is a house larger than what we actually need or an overly expensive car, buying “too big” is a common concern across America.  Most of us need to continually work on scaling back on our basic living expenses. Do we really need a high dollar data plan on the cell phone? What about cable, do we actually watch all 100+ channels?  Learning to live within our means and only make the big purchases that we actually need, and can afford, goes a long way toward retaining and restoring financial health.

We hope something in this simple and basic blog was thought provoking and helpful.

Please always feel free to contact our office with questions or concerns.  We are here to help guide you to the best solution for your financial situation.

269-344-0700