When you’re struggling with debt, your credit score takes a hit. This makes it difficult to borrow money for large expenses, such as a car or a home. You may even find it difficult to get a credit card.
Bankruptcy may have seemed like the only way out. At that time, that may have been your only choice. But that’s okay; that situation does not last forever.
Fast forward a few years, and you’ve managed to pay off all debts, and your credit score has been restored. Now what? Well, for starters, it’s important to make a budget and stick to it. Make sure you keep track of every penny that comes in and goes out of your bank account. If you find yourself falling behind on bills or having money left over at the end of the month, make some adjustments. But before you go out and spend it all, ask yourself another question—do you need the things you are spending your money on?
Are they worth the amount of money you are putting into them? If not, find other ways to save money.
Bouncing Back: Things You Should Slowly Rebuild
While you may feel like going out and buying a new car once your old one breaks down, it is advisable to hold off on this for a while. Each time you make a large purchase such as this one, it can take some time to pay it off.
The more money you owe, the harder it will be to bounce back from a time of hardship.
It’s also important to start building your emergency fund back up. If you were in a financial bind before, it is likely that at some point, this will happen again.
So make sure you save an extra $500 to $1,000 per month in the meantime. This will help ease the burden when life throws you another curveball.
Rebuild Your Credit
One of the biggest obstacles in bouncing back is regaining your credit score. Many things go into building your credit, but usually, it all boils down to this: spend less than you earn and pay everything on time.
Make sure all bills are paid on time, or even better before they are due. Paying a bill late can result in a fee and a lower credit score.
Don’t take out any loans until your financial situation is stable and secure. While this may seem counterintuitive, it’s the best way to keep from falling into deep debt once again.
Of course, a house is a different story. It can save you money in the long run because you won’t have to rent. FHA loans are a great option because they will help you bounce back faster with their low down payment.
Make a Budget and Stick to It
Once your emergency fund is back up, you should start planning for the future. If you have been struggling financially, it’s likely that many things have been put on hold. Well, now is the time to catch up. You might want to buy a home or a car soon, and you’ll need a good credit score to get the best rates.
So once again, make a budget. Get out your paper and pencil or open your spreadsheet on your computer. Take a look at how much money you have coming every month, how much is going towards bills, and how much money you have left over.
Decide how you can spend your money in a way that will get you the most value.
Example: If you have a goal of buying a home within the next year, look for ways to save money on your monthly expenses. If you’re spending $100 each month on cable, call your provider and see if they can lower your monthly rate. If you’re able to cut out cable altogether, that’s even better.
A Few More Tips for Rebuilding Your Life
It might be tough at first not to spend money on frivolous things. But keep in mind how much extra time and effort it will take to pay off your debts once again (not to mention interest rates).
Take a look at what you have already. Do not get rid of everything out of some desperate attempt to bounce back financially. Chances are, you probably don’t need it all. Sell off items on eBay or Craigslist if they can bring in some extra cash for you.
The most important thing to remember is that all things take time. If you’re struggling, it may feel impossible to bounce back from a time of hardship.
But with some hard work and dedication, the sky’s the limit. This is just one of many hardships that can be overcome with determination and a positive outlook.