Resolve to Not Let Last Year’s Financial Setbacks Dictate Your Future Success
Keith L. Rucinski, CPA, JD Chapter 13 Trustee, Akron, OH
Last year was not so great. You may have lost your job due to corporate downsizing and had to accept a lower paying position. There were unexpected medical expenses. Your family needed financial help. You bought a new home at the wrong time and at the wrong price. You maxed out your credit cards.
And finally had to file bankruptcy.
In the new year, resolve to rebuild your finances. That rebuilding will require working to improve your credit score, changing how you look at purchases, and designing a budget that works for you and your family.
In the short term, your credit score will take a hit because of the bankruptcy. The good news is most of your past debt (except for car payments, house payments, and student loans) have been discharged. Credit card companies will begin sending you new offers (as the new debt cannot be discharged in bankruptcy for several years). The offers will not be cheap, expect interest rates as high as twenty percent for outstanding balances. Resolve not to have an outstanding balance. Only charge what you can pay off by the due date each month. By paying timely each month, you will begin to rebuild your credit score.
Resolving how you look at purchases takes time. Think of it this way, “would you spend $1,680 dollars for a morning cup of coffee?” Taking a daily expense and projecting how much you spend in a year can help you understand how much the expense affects your finances. In the example, spending $7 a day for coffee for 240 working days a year will cost you $1,680!
If you go into a workplace, resolve to make your coffee and lunch at home and bring it with you. This alone can be a big savings to your daily expenditure.
Another way to see how expenses affect your finances is to give yourself a weekly allowance and only pay for your daily expenses (gasoline, lunch, etc) in cash. People get a lot more frugal when paying cash because they actually see the money they are spending leave their wallet.
Resolve to stop using auto pay and auto renewals for all your expenses. It is easy to lose tract of how much something costs if it is automatically paid. Make a decision to review your expenses monthly and make the decision on when an item gets paid. But you must make the payment before the due date. Maybe you are paying for gym memberships and subscriptions you no longer use and forgot that you were paying for them automatically. The New Year is a good time to review all of your expenses and cut back where you can.
Resolve to design a budget that works for you and your family. A good way is to make a list on what you think you spend money on for a month. Next, track every expense you make in a month. At the end of the month, compare the lists. Most people are shocked to learn how they spent their money. This process helps people understand how to focus their budget and reallocate their funds on items that are important to themselves and their family.
Resolve to not let last years financial setbacks deter you from future success!