June is Rebuild Your Life Month
It can be difficult to get back on track after challenging life events that affect your finances. But difficult doesn’t mean impossible—you can rebuild your financial life one step at a time. Here are some methods to consider to do just that:
After a divorce
Start with an inventory of your finances. List your income, expenses, assets, and liabilities. Get your credit report and know where you stand. Make sure that any joint accounts you had with your ex-spouse that can be closed, are closed.
Once you have your new financial reality on paper, balance your budget. This involves not only budgeting for your weekly and monthly expenses, but setting money aside for retirement. Work with a financial professional on untangling your former retirement plans and beginning a new plan as a single person. Be sure that the beneficiaries on all your accounts are updated, if applicable.
The most important thing is to update your financial plan so that it reflects where you stand today, as a single person. Learn as much as possible about finances, especially if your former spouse was the one who took care of those things.
After longterm unemployment
Losing a job in our current economy means you’re going to need to be as objective and honest as possible with yourself about your industry and job skills. Is your industry in decline? Are your skills transferable? It is imperative to be open to learning new skills and beginning a completely new career if necessary.
Once you’ve gotten a new job, you’ll need to not only create a budget for your regular expenses, but prioritize what debts you’ll catch up on first. If you’ve gotten into the habit of using credit cards while unemployed, put those cards away and add paying down their balances to your budget plan. Consider paying down any debts that are past due as quickly as possible to avoid having them go into collections. If you are past due enough that some debts may be close to going into collections, you may be able to contact the companies you owe and attempt to set up a payment plan.
Bills such as your mortgage and auto loan may take priority over credit cards. Make sure you are on solid ground with those essentials, then focus on rebuilding your credit if it has suffered. Paying credit card bills on time and lowering high balances may help to repair any dents in your credit rating.
After Chapter 7 bankruptcy
A Chapter 7 bankruptcy remains on your credit report for at least ten years, but it doesn’t have to be a life sentence for your finances. The most important thing to do is to keep your finances under control and have savings available for emergencies.
Use what you learn from going through the bankruptcy process to assist you in making a budget, and focus on sticking to it. It is also important to build your savings now; it’s a good idea to have an emergency fund in case of job loss or other issues that may come up, since you may have a hard time getting financing.
Many people believe that you cannot get a credit card after filing for bankruptcy, but you often can—credit card issuers all have different standards, but some may allow you to obtain a secured credit card. A secured credit card requires that you put down a security deposit, typically a sum of money equal to the credit card limit, so the issuer can be protected in the event you don’t make the payments. Getting a secured card, using only a portion of the available credit, and paying it on time without fail can help improve your credit score. Be sure to regularly check your credit score so you can monitor its progress over time.
Ultimately, no financial setback is impossible to overcome. With diligence, patience, and old-fashioned hard work, you can restart your financial life and get to a secure place. Start saving by opening a Popular Direct Savings account.