Bankruptcy Facts, Repair Credit after Bankruptcy, Philip Tirone

When foreclosure or bankruptcy facts start taking hold of your life, you can fight back by learning how to create a budget. Establishing a baseline of your weekly or monthly expenses helps you find opportunities to cut expenses and find money to put towards paying down your debt or investments and establishing financial peace of mind.

Once you decide to sit down and learn how to create a budget for yourself, you will have a record of where your money goes and a great opportunity to make a plan for your future.

Before you create a budget for yourself, review the following items.

1. Look at the way you spend money. The first step in learning how to create a budget is to keep a thorough log of your expenditures. This allows you to identify your biggest temptations to spend money. If you enjoy retail therapy, consider if your purchases are absolutely necessary and if they are worth the expense in light of the number of hours of work that they cost. Re-examine your habits and avoid buying items when you are tired, depressed, or angry.

Once you start writing out your budget, record all your monthly expenses in as much detail as possible, followed by your anticipated monthly income over the next 12 months. Deduct your monthly expenses from your income. If you have money leftover, you can use it to pay off your most pressing debts, such as high interest credit cards. This will help you repair credit after bankruptcy.

2. Examine your luxury expenditures. The next step in learning how to create a budget is to categorize your expenses. Mark those that are necessary, followed by those that are important, followed by those that are luxuries. You might be surprised by how much you spend on luxuries, like valet parking. If you are recovering from a foreclosure or bankruptcy, you should probably give up these luxuries for a few years, using your money to create a solid foundation for your life. At a later date, when you have more financial flexibility, you can always add them back to your lifestyle.

3. Make technology a habit. Sometimes, learning how to create a budget that is effective is a simple matter of organization. Use software and other technology (the iPhone has many helpful applications) to help you make payments online, insert reminders in your calendar, and assist the budgeting process.

4. Create a set of expectations or goals. If you want to know how to create a budget that sticks, be sure you outline a written set of guidelines for your purchasing behavior and expenditures.

5. Stop spending money by knowing your “Hour Factor.” Before you purchase anything, think about how many hours you must work to pay for it. If you make $15 an hour, you will work ten hours to pay for a $150 gadget – more if you consider taxes (and you should). Before making a purchase, ask yourself, “Do I have ten hours to spare?”

6. Look for ways to make more money. If meeting your budget doesn’t seem possible, ask your boss for more hours or come up with another way to pay for it. You can hold a garage sale, or start a habit of selling unused items on eBay every month.

If this doesn’t help you produce the money you need, you’ll have to find other ways to come up the money: take a second job, sell your car and take other types of transportation, cook instead of going out to eat, ask for a raise at work, have a garage sale to sell off unused items, or hire a tax professional to do your taxes.

If you have faced bankruptcy or another financial meltdown, now is the time to learn how to create a budget. Learn from your past, and remember that you have to either make more money or cut down on your expenses. Otherwise you’ll fall deeper in debt, increasing the amount of money you owe.