You’ve been through a bankruptcy and have felt the shame, guilt, and utter stress that such a financial disaster incurs. You’re wondering when, if ever, will you be able to rebuild your credit and move along with a normal financial life. You are not alone. More than 2 million bankruptcies were filed, in progress, or discharged in 2012. There are many people, many couples, many families out there who have been have been through bankruptcy. Take heart—there is life after the dreaded B-word, and here are some tips for getting back to it.
Let Go of Your Guilt and Shame
It’s natural to initially feel devastated about having to file for bankruptcy. However, do not dwell in those negative feelings. Hanging on to shame and guilt can actually hinder you from moving forward in a positive way in many areas of your life. You did not commit a capital crime, after all, you filed for bankruptcy. Remember this, too, shall pass. There are far worse things that could have befallen you, so let go of the negative and move forward.
Establish and Adhere to Your Budget
Hopefully you’ve done this during your bankruptcy process, but if not, do this immediately. Yes, it may seem tedious and like something you mother told you to do when you were in high school or college. However, your budget ensures you know your monthly expenses, monthly income, and where all that money is going. Your budget is your monthly financial road map; your future financial success depends upon you sticking to it.
Live Within Your Means
This can be a difficult adjustment for some, while others have no problem living within their means, i.e., not spending more than the extra cash you have on hand each month (assuming you have extra). This means examining what you need vs. what you want, and learning to live without charging many expenses to credit cards (and hoping you’ll figure out how to pay it later). This equates to, oftentimes, having to wait and save in order to make those purchases you’ve been planning. And in our I-want-it-now society, it may seem like torture, but it’s really not. This is how your great-grandparents, your grandparents, and possibly your parents approached spending money on extras… and they survived it.
Pay Your Current Bills On-Time
It is imperative that you pay whatever monthly bills you currently have on-time every month. This is the easiest and fastest way to begin to rebuild your credit. This also establishes a healthy bill-paying pattern, which sets you on a good track for continuing this practice in the years to come. Having the money to pay these bills on-time also depends upon you establishing that budget and living within your means.
Small Loans Make a Big Difference
This may sound counter intuitive, but it’s true that taking out a modest and manageable loan for something you have all or most of the money for—and then dutifully repaying that small loan via monthly payments—does assist in rebuilding your damaged credit. This is demonstrating the new financial You and your ability to responsibly pay off debt. The key is to already have all or most of the amount of this small loan on hand, so that you’re not truly borrowing without knowing how you’ll pay for it.
Cautiously Tread Back Into Credit Cards
The decision to eventually return to using credit cards—or not—is entirely up to you. The “financial experts” may tell you that you must, must, must foray back into credit cards, but this is questionable. The idea behind reestablishing a credit card is basically the same as the small loan idea. The problem with this is that credit card spending is easier and more apt to quickly get out of control. Only you can determine if this is a responsibility you again want to shoulder, if you will be a responsible user, or if you should forego credit cards all together.
Keep Things in Perspective
Bankruptcy is not, by a long shot, the worst thing that can ever happen to you, despite the propaganda to the contrary. The situation was an unfortunate financial misstep, which you have and are endeavoring to correct. Be proud that you took action to right the situation! Keep this event in perspective with the rest of your life events. Focus your energies on all the positives around you.