When faced with massive amounts of debt, filing for bankruptcy is often the first step of the process. From here, you'll also need to make changes to your financial habits to keep you on the right track and help you rebuild your credit history in the wake of bankruptcy. This involves making a budget, and The Balance explains the steps you can take to do so.
Create a monthly average for expenses
To create a reasonable budget, you must first understand your monthly expenses. This entails bringing together financial statements for recurring expenses, such as health insurance, utility bills, and mortgage or rent payments. Next, compare this figure with your current monthly income. This will give you a good idea of where you stand financially, which is integral in creating your budget.
Look for areas where expenses can be cut
Fixed expenses are those that are the same each month, such as utility bills. Variable expenses tend to change on a monthly basis, whether they involve grocery shopping or fuel for your vehicle. These are the expenses it will be easiest to cut, so target unnecessary costs to make adjustments. For example, if you eat out frequently try having more meals at home to save money. You can also make adjustments to entertainment costs, which are usually the easiest area to tweak.
Review your budget on a frequent basis
Your work isn't complete once your budget is in place. You definitely want to review your budget regularly to ensure it still meets your needs. For instance, if your income increases you may be able to boost your savings, which is crucial to prevent severe financial issues from occurring.