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USA Real Estate Blog

How Do You Start Rebuilding Your Wealth?

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Bankruptcy isn’t the end of the world. In fact, it’s the beginning of your future. Bankruptcy is often used as a financial tool to get past otherwise insurmountable debts. It’s an exciting time: your debts are wiped out and you can start again. But after bankruptcy has occurred, you need to start to rebuild.


Here’s how.

Begin By Taking Care of Your Credit

Your credit is going to be impacted by bankruptcy for up to 10 years. But it’s not a linear progression. Over time, the credit impact is going to be lessened. You may be able to recover your credit score faster than you think.

After a bankruptcy, you may be surprised to find that you’ll start getting credit card offers in the mail quite quickly. Often, these credit cards aren’t the best option, because they have very high annual fees.

Instead, sign up for a secured card. A secured card is a prepaid card: you send in money, and that money becomes your credit line. In all other ways, it operates like a credit card. But it’s open to those who have bad credit.

Once your credit has improved enough, you’ll be able to sign up for an unsecured card. You should still avoid anything that has an annual fee, because that only cuts into the amount of money you can save. If you make sure to pay off your balance every month, you won’t pay interest.

Consider freezing your credit report after you’ve acquired credit cards. This will mean that it’s harder to open new credit lines, though not impossible. You’ll be able to avoid impulsively opening things like store cards.

· Automate it! Make sure your credit card is paid off in full every month. Many credit companies let you sign up for auto-pay. Put a small subscription on your credit card, sign up for auto-pay, and watch your credit score grow.

Start Saving Up Extra Money

It’s time to save up enough for an emergency savings account. Your emergency savings account should be at least three months of your wages. An emergency savings account will ensure that you don’t end up in debt again if an emergency happens.

Of course, there’s a limit to how much you can save, and you often need to build a budget first before you can start reliably saving. There are a number of tools available to help you draw up a budget and follow it.

Many people feel as though they can never maintain an emergency savings account, but an emergency account is really meant to be spent. The purpose of an emergency account is to prevent you from going into debt again. If it is able to do that, it’s doing its job.

· Automate it! Create an automated transfer from your checking account to your savings account, and then consider that money spent. You should always pay yourself first.

Conduct a Self-Audit

What were the risk factors that led to you declaring bankruptcy? Was it a lack of insurance? Was it a lack of emergency funds? It’s possible that your bankruptcy wasn’t your fault at all, but that doesn’t mean there aren’t risk factors that could have led to it.

Conduct a self-audit by identifying any issues that could have contributed to your bankruptcy. These issues could include:

· Opening credit cards and not paying them off. 20% interest catches up with you over time.

· Having medical debt. You can’t avoid medical issues, but you can invest in additional health insurance.

· Losing a job. In this situation, there are limited things you can do, but having a healthy emergency savings account can help.

Again, often a bankruptcy isn’t your fault. But there are ways that you can prepare to avoid having to go through bankruptcy again.

Make Sure You Follow Your Budget

Many people end up declaring bankruptcy due to circumstances beyond their control. It’s very possible that you have a healthy relationship with your money, but you simply experienced an emergency, such as medical issues. However, during this delicate time, it’s more important than ever to draw up and stick to a budget.

You can create a budget in a budget program and set it to alert you any time you exceed that budget. Find a budget program that works best for you: there are a number of options that play into different budgeting strategies.

· Automate it! Download an app like You Need a Budget to notify you every time you overspend. Being mindful of your transactions is a great way to make sure you aren’t spending too much.

Downsize and Reduce Your Expenses

While you can save a lot of money by cutting out unnecessary expenses, it may be important to downsize as well. Big ticket budget items such as housing costs, insurance costs, and automobile costs may be where you need to cut your spending the most.

Take a look at your “inflexible” spending items: the biggest items on your budget that are static costs every month. Consider moving if it would reduce your cost of living while maintaining your quality of life.

Avoid Credit Repair Companies

After a bankruptcy, you’ll be contacted by a number of credit repair companies. Don’t bite! Credit repair companies are generally scams. After a bankruptcy, the only thing you need to do to “repair” your credit is keep paying your bills. Anything that needed to be paid has already been dissolved through the bankruptcy itself. A credit repair company will charge you exorbitant fees to give you very basic advice.

Debt management is all about creating proper systems and solutions. There isn’t a magic service that you can pay to do it for you, but you can learn more about it over time.

Create Your Future Goals

Now is the time to be focusing on what you want for your life, whether it’s opening a business, buying a house, or moving to another location entirely. Working towards future goals is the perfect way to keep yourself focused. You can’t remain disciplined if you don’t know why you’re doing so.

Split your goal into small, manageable steps, set a timeline, and track your progress. As an example, if you wanted to purchase a home:

· Repair your credit.

· Save up a down payment.

· Research the right location.

Your bankruptcy should allow you to recover within five years, even if it stays on your credit for ten. You can schedule these goals so that your credit is repaired and your down payment is saved by this time.

· Automate it! Put your goals in your calendar to give yourself time to self-check. Make sure you remain on target, and even the largest goals can become simple.

Start Investing in Your Retirement

One of the fantastic things about bankruptcy is that it doesn’t hurt your retirement account. After your bankruptcy is when you should start investing in your retirement account again. A healthy retirement account gives you a lot of flexibility; you can borrow against it during emergencies, and you can cash it out with a penalty if you need to.

Start a scheduled deposit into your retirement account and make sure your money is either invested automatically or invested regularly. You’ll be able to see your money grow, while also reducing the amount of taxes you need to pay.

It’s time to start building your financial future again. Automation can help. Check out the information at Automate100 to get started today.

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