In decades past, filing for bankruptcy was equated with some level of financial failure. In truth, even a small emergency can send finances into a tailspin. Scenarios from job loss to divorce to medical emergency can upset a family’s balance and threaten a stable future.
Bankruptcy is a sound option for those seeking to eliminate debt and build a strong financial future. After Chapter 7 or Chapter 13, however, individuals must remain vigilant to avoid past mistakes and strengthen their finances.
One of the most important things individuals must do is create a realistic budget and stick to it. From the reduction in discretionary spending to the honest separation of monetary wants versus needs, a budget is a clear way to build upon bankruptcy’s fresh start. In creating a budget, however, individuals must be aware of the different types of financial goals.
- Short-term goals: When organizing goals, remember that short term goals are generally anything that can be accomplished in a year or less. Short-term financial goals, for example, could include saving for a vacation or purchasing a new kitchen appliance.
- Mid-term goals: This type of financial goal could probably be accomplished in a year similar to a short-term goal but shouldn’t. Consider short-term versus mid-term the same as “needs” versus “wants.” Unless your current car stops working, purchasing a new car might not be a top priority.
- Long-term goals: When a goal will likely take five or more years to accomplish, it is a long-term financial goal. Saving for a child’s college education, for example, or building a retirement fund can be considered long-term goals.
In general, a good way to avoid future financial trouble after going through bankruptcy is to set a budget with strong financial goals. Bankruptcy exists to give individuals a fresh start and the best way to take advantage is to make a plan and follow through on it. Don’t hesitate to discuss your unique situation with a skilled bankruptcy attorney.