Rebuilding finances and doing it right this time

[Spaghetti42]

TL;DR Need resources for people who are stupid with money and want to do it the right way AFTER a BK.

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Not sure if this is the right forum to put this in…it's not really an "after" story unless you count it being after my first BK in 2005!

I am planning to file Ch7 again. Turned the paperwork into the lawyer today. Maybe I'm counting my eggs before they hatch, but since this will give me a fresh start I really want to do it right this time. I want to build wealth and rebuild my credit enough that I can get a CC for emergencies and get a loan when I need it. I want to live largely debt-free; I am OK with owning a beater car and I don't know if I'll ever buy a house (maybe a condo).

The reasons for my BK are not entirely out of my control, they are a combination of job loss/mental illness (depression makes you hide your head in the sand).

I don't make a lot of money. I am well below the median income for my state. I have $0 savings, cashed out my 401K due to job loss in 2009, and if my BK is discharged, my net worth will probably be less than $1K. Luckily, without the credit bills, my living expenses are pretty low and leave me with some room.

I am sick of living paycheck to paycheck and always worrying about what if something goes wrong. My car is on blocks right now, and I'm lucky (?) that my unemployed boyfriend's car isn't broken down so I can use that to get to work.

I've been looking for resources that will help me learn how to manage my finances and reset my way of thinking so I am more focused on building wealth for the future and not having XYZ thing now. I've got "Personal Finance for Dummies" which is a start. Can anyone direct me to anything that is more tailored to my situation? I've been googling different terms and none of them seem to come up with quite what I want.

[LadyInTheRed]

Have you taken your pre-filing course yet? You may get some useful information during that course, including how to create a budget. There is also a financial management course that you have to take after you file and before your discharge this is supposed to help you learn to manage your finances so you don't end up in BK again. Some find the class more helpful than others. If you feel you need more help after taking that course, the provider of the course can probably refer you to other resources.

You might find some helpful information at http://www.consumercredit.com/financial-education.aspx. The same site is a provider of the required pre and post bankruptcy clases. If you decide to take one of those courses, make sure they are an approved provider in your state.

You might like books by Dave Ramsey or Suze Orman. They are both very anti bankruptcy. So, ignore that part. But many swear by their advice for ongoing financial management. Dave Ramsey is the one I've seen recommended most on this site.

You will find tips on rebuilding credit in this subforum.

I want to build wealth and rebuild my credit enough that I can get a CC for emergencies and get a loan when I need it.

I'll give you lesson #1 right now: A credit card should not be used as an emergency fund. I reliaze that it may be your only option if an emergency comes up before you can build a savings. So make building an emergency savings your top priority.

[Spaghetti42]

Hi LadyInTheRed,

Thanks for your reply. I did do my pre-filing course, it was pretty basic information. I am interested to see what the pre-discharge course will contain. Thank you for the link and the author suggestions.

I have started to deposit $50 per paycheck into savings. I would like to find a more "untouchable" savings/investment option, though. Now that I think about it, I can totally use my debit card for things like hotel reservations, so you're right, I don't need the CC for emergencies. I do want to get like a gas CC and maybe a store CC down the road and start doing the "charge a little, pay it off" thing. I plan on doing that one at a time to test myself.

I also wonder if I should go into counseling or find a "Retail Therapists Anonymous" type group :-) My spending isn't nearly as bad lately as it has been in the past but there is always a chance of relapse.

(I just noticed my typo in the title...AAAGH! )

[daveinIL]

I have started to deposit $50 per paycheck into savings. I would like to find a more "untouchable" savings/investment option, though.

If your company has a 401k retirement plan with employer matching, then one of the best investments you can make is to maximize your employers contribution. My employer matches 100% of the first 3% of my salary that I save and then they match 50% of the second 3% that I save. What this comes out to is if I contribute 6% of my gross pay to my 401k then my company contributes 4.5%. That's a 4.5% pay raise...free money!

Since this is all done pre-tax, then the 6% reduction in gross pay is less than a 5% reduction in net pay.

[Spaghetti42]

Sadly my employer doesn't have that (small business) :-( I used to work for a company that did but I had to cash that out after I lost the job. Once this is all said and done, I want to check with the CU where I have my savings account to see what options they offer. Maybe they'll have an advisor or something, lol!

[cometkitty]

Check out "you need a budget". I just downloaded that software and so far I love it. Really easy to use and helps you create a flexible budget. They have online courses too.

[LadyInTheRed]

Sadly my employer doesn't have that (small business) :-( I used to work for a company that did but I had to cash that out after I lost the job. Once this is all said and done, I want to check with the CU where I have my savings account to see what options they offer. Maybe they'll have an advisor or something, lol!

I believe most financial advisors will tell you an emergency fund should be your first priority. A short term CD may be a good idea for a slightly less accessible emergency fund. But, an emergency fund needs to be pretty accessible so it is available in an emergency. Set a target for your emergency fund. Once you reach that target, then think about opening an IRA with your CU. Or, you if there is no minimum deposit requirement, you could start with a very small IRA contribution, like $10 a month, while you build your emergency fund. You can probably set up an automatic transfer from your checking account to an IRA.

can totally use my debit card for things like hotel reservations, so you're right, I don't need the CC for emergencies.

Make sure you distinguish between your emergency fund and your budget. If your incur travel expenses that your employer doesn't advance, that should be part of your budget, not something you take from your emergency fund.

[TheBajan]

My motto is to keep it simple. There are two very basic rules you need to live by if you are going to live within your means.

1. ALWAYS save a bit from EVERY paycheck. ALWAYS! This cannot be over-emphasized.

2. Create a spending plan that includes every dollar you expect to receive and every bill you expect to have and then (this is the hard part) LIVE BY IT. This has to include those things that come up a couple times a year. For example, car insurance. If you pay $600 a year then divide that by 12 and budget $50 a month for it.

It really boils down to those two things. Yes, there is more to it than that but if you will just focus on those to things, you will find that everything else falls into place. Stop relying on CC's for emergencies. That's how we ALL ended up in this mess. Before CC's became popular, people used to save money for a rainy day. Now we just count on credit and pay back later. Apparently, that is not working out too well for you. Put the horse before the cart and get the savings built up. Let your credit score be the very last thing you think about. In fact, don't even think about it. Just repair your life. Learn to say no to your wants and wait until you are in a safe place to really define what is a want vs a need. In other words, don't make the decision to purchase something outside of the spending plan you have created without first being absolutely sure that it's a need and that you have a way to pay for it.

Crown financial has some online software that mimmicks budgeting with envelopes. Dave Ramsey does also. Crown's software is without a doubt the very best. They offer a free limited version and the upgrade is not terribly pricey. Dave Ramsey has fantastic advice. Down to earth, sensible, common sense. His entire focus is to teach people how to get out of debt without going bankrupt and with the exception of his anti-BK perspective, I have to agree with most of what he teaches. He has a live radio program and you can find him pretty much everywhere.

Best of luck to you. Stick around. We are all in the same boat here and will gladly help to encourage, support, and hold you accountable if you want that.

The Bajan

http://www.mvelopes.com/

[Spaghetti42]

Hi everyone, thanks for the ideas. I did check out my CU website and they offer IRAs, CD, Money Markets, and some investments that I plan to speak with a financial advisor about once I get to that point. I am already saving out $50 per paycheck that is going directly into my savings account which will be my emergency fund and, when it gets big enough, the source for my CD deposits, etc. I might even open another savings so I can separate the two.

cometkitty, I did check out YNAB and it looks amazing! I'm totally getting in on that. TheBajan, I will also check out Crown Financial.