Filing for Chapter 13 bankruptcy is a big decision that can result in significant financial benefits and get you out of debt. However, to reach that pinnacle of debt-free living, you must ensure you can repay monthly.
The best way to do this is to set a written budget that allows you to make your monthly payments, pay your other bills on time, and afford the essentials for you and your family.
How can you do this? We’ve put together the following tips to help you successfully live on a budget during the Chapter 13 bankruptcy process.
Understand Your Financial Situation
The first – and most important – step is understanding your financial situation. Sometimes, facing the numbers is hard, but it’s essential to keep your bankruptcy proceeding. Figure out how much money you have coming in each month, then make a written list of all of your bills and expenses. This should include your mortgage or rent, car payment, groceries, gas, utility bills, any Chapter 13 bankruptcy fees, and the amount you agreed to pay per your repayment plan. It’s crucial to include all expenses on this list. If you pay it, it should be accounted for.
Calculate Your Discretionary Income
Subtract this amount from your monthly income once you have a handle on your essential expenses. This remaining amount is your discretionary income—the money you have available for everything else. And we mean EVERYTHING else. This means all of the money you have for extra items like going to the movies, shopping, ordering takeout, going to a sporting event or concert, or any other unnecessary items. Unfortunately, if it doesn’t fit into your budget, you might have to skip it for a while.
You can divide your discretionary income into categories to better track how you spend it. These categories can include clothing, entertainment, dining out, etc. Determine how much you want to spend in each category each month, and stick to the limits! This will allow you to still enjoy some fun outings without breaking your budget.
Find Free Activities
Just because you’re living on a budget doesn’t mean you can’t have fun! There are a lot of free activities you can enjoy—it might just take some digging and getting used to. You can always enjoy outdoor activities like hiking, walking, or going to parks. You can also look for free days or discounted rates for museums and other local attractions or even go to the movies when the ticket prices are reduced.
You can even make it a fun challenge to see how little money you can spend on weekend activities. Set a written budget—or strive to find free events—and stick to it. You’ll find you can still have fun. As an added bonus, you will save money that can be used elsewhere.
Make It a Household Priority
The key to living on a budget is to ensure your household knows the budget and where money is being allocated. Get the whole house involved and explain where money will be spent each month. Keeping everyone in the loop will ensure extra money isn’t being spent.
Set Aside an Emergency Fund
Life happens, and expenses occur that you might not have accounted for in your budget. To handle these, it’s important to set aside a small emergency fund for unexpected car repairs, medical bills, HVAC breakdowns, or other unexpected expenses.
Keep Perspective
Living on a budget can be difficult, especially at first. And yes, you will need to make some sacrifices, turn down some activities, and skip vacations while you work through your Chapter 13 bankruptcy. But during the dark days, keeping perspective on why you are doing this is essential. Think about the long-term benefit of getting out of debt and the financial freedom you will have.
Let Us Help You With Your Chapter 13 Bankruptcy
If you are struggling to stay on budget during your Chapter 13 bankruptcy proceedings, get help reviewing your finances and expenses and creating a realistic budget you can stick to. Let our lawyers at the Law Offices of Alexzander C.J. Adams, P.C. help. We work for you, the people, and not institutions. Contact us for a free case evaluation or no-obligation consultation. We are dedicated to helping you overcome this minor bump in the road and assisting you in getting on with your life.
