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How To Manage Your Spending After Debt Restructuring

By Spodek Law Group | February 20, 2024

How To Manage Your Spending After Debt Restructuring

Getting out from under a mountain of debt through restructuring can feel like a fresh start. Maybe you filed for bankruptcy or worked with creditors on a debt management plan. Regardless of the specifics, debt restructuring gave you breathing room in your budget.

Now it’s time to make the most of that hard-won financial freedom. Careful spending management after debt restructuring helps you avoid racking up new debt. With some practical strategies, you can build savings and work toward financial stability.

Take Stock of Your Finances

Before creating a new spending plan, take time to review your finances following debt restructuring:

– List all debts included in restructuring – which ones got discharged or modified? What debts or payments remain?

– Review your credit report and score. Debt restructuring likely impacted them. Understanding the changes helps guide next steps.

– Calculate recurring monthly income and fixed expenses. This gives a clear picture of the cash you have to work with for spending and savings.

Having specifics about where you stand financially makes it easier to set a realistic budget. Online tools like Mint or YNAB can help track all the numbers.

Build Your Spending Plan

Next, construct a detailed monthly spending plan:

– Include all recurring expenses – housing, transportation, insurance, minimum debt payments, utilities, subscriptions, childcare etc. Be thorough. Leaving something out means an incomplete picture.

– Get real about spending habits – Review a few months of bank/credit card statements. Where does your money actually go each month? Use that insight for realistic spending estimates.

– Prioritize essential expenses – Rank spending categories by necessity. Shelter and utilities should come before entertainment, for example.

– Plan weekly grocery trips – Meal planning and grocery lists curb impulse spending. Allow a little room in the budget for dining out.

– Identify low-value expenses to cut – With limited funds, discretionary spending deserves extra scrutiny. What can you cancel or reduce?

– Set aside funds for irregular expenses – Car repairs, medical bills, home needs don’t happen monthly but you need to save for them.

– Include savings – Pay yourself first each month by automating transfers into savings. Even small amounts add up.

[This budget worksheet](https://www.findlaw.com/consumer/consumer-credit-and-debt/budget-worksheet.html) from FindLaw provides a useful template. Revisit and adjust your spending plan regularly as income and expenses change. Apps like Mint and PocketGuard can help track all the transactions.

Ways To Curb Spending

Sticking to your carefully constructed spending plan takes commitment and discipline. These practical tips help limit temptation and overspending:

– Automate saving and bill payments – Set up automatic monthly transfers from checking to separate savings accounts and automatic payments for recurring bills. This dedicates funds before you can spend them.

– Pay with cash – Using only cash or your debit card helps curb overspending since you can’t spend more than you have on hand.

– Delete shopping apps/unsubscribe from promotional emails – Reducing exposure to sales appeals limits impulse spending. Avoid stores offering constant discounts or deals if you tend to overspend there.

– Wait 24 hours before purchases – It’s easy to get caught up in the moment. Give yourself some time to consider a purchase objectively. Often the desire passes.

– Seek lower-cost entertainment – Meet friends for a hike or potluck dinner instead of an expensive night out. Libraries offer free movie rentals and books.

– Bring your lunch to work – Eating out less saves a surprising amount over time. Meal prepping reduces the urge to grab takeout for lunch.

– Negotiate bills and look for cheaper services – You may be able to lower monthly expenses by negotiating bills, finding cheaper insurance/internet/phone plans, or canceling unused subscriptions. Every dollar saved means more to allocate elsewhere.

Rebuild Emergency Savings

Emergency savings allow you to cover unexpected expenses without relying on credit cards or loans. Try to set aside at least $500 initially. Even small monthly contributions will grow your cash reserves. Once you have 3-6 months’ worth of basic living expenses saved, you’ll have a cushion for life’s surprises.

Boost Income To Power Savings

In addition to cutting expenses, finding ways to earn more income accelerates saving and financial progress. Even an extra $100 per month makes a difference. Options to consider include:

– Ask about overtime hours or freelance gigs

– Develop skills for a higher-paying role long-term

– Take on a side gig like rideshare driving, tutoring, or pet sitting

– Sell unused items around your home

– Rent out a parking spot or spare room

The key is identifying realistic ways to consistently earn a little more each month. Develop multiple income streams for maximum flexibility.

Rebuild Credit

Good credit means access to affordable loan rates which helps handle major expenses down the road. Late payments or collections damage your credit. After debt restructuring, focus on rebuilding your credit score with some smart strategies:

  • Pay all bills on time – set up autopay or payment reminders
  • Keep credit card balances low and pay in full each month
  • Become an authorized user on someone else’s account
  • Limit new credit applications – too many looks desperate
  • Ask creditors to remove late payments from your history
  • Review your reports and dispute any errors

Improving your credit score after debt restructuring takes diligence and patience. But it expands your financial opportunities long-term.

Create a Reward System

Committing to a strict spending plan after debt restructuring means making sacrifices. Build in some affordable rewards along the way so it feels sustainable rather than depriving:

  • After 3 months of sticking to your budget – enjoy a nice meal out
  • After fully funding emergency savings – take a weekend getaway
  • After 6 months of no frivolous purchases – get a massage
  • After increasing income $200/month – attend a local concert

Having milestones to look forward to makes it easier to delay gratification day-to-day. Just be sure rewards align with your financial goals.

Lean on Others For Support

Talking through challenges you face adjusting spending habits can help. Connecting with people who have been there offers motivation to stick it out when you feel discouraged. Consider:

  • Joining a debtors anonymous group
  • Participating in an online community for those in debt
  • Reading inspiring blogs and podcasts about achieving financial freedom
  • Finding an accountability partner to share goals and progress with

Staying focused on living within your means gets easier with time. Draw on resources and people to help you through the tough transition period.

Give Yourself Grace

Understand that changing long-held money habits requires an adjustment period. Despite your best efforts, you’ll likely mess up sometimes:

  • Missing a credit card payment
  • Splurging more than planned for a birthday gift
  • Grabbing takeout when too tired to cook
  • Failing to account for a recurring expense

Instead of getting down on yourself, recognize two steps forward and one step back is still progress. Learn from slip-ups without self-shame. Then refocus on your financial goals.

Stay Vigilant Going Forward

Getting into debt happens slowly over time. The climb out of debt through restructuring seems long and difficult. But staying committed to careful spending helps avoid sliding backwards once you regain stable financial footing.Keep going to meetings or participating in online groups. Review your budget periodically for needed adjustments. Automate payments and savings so good financial habits become routine.Most importantly – congratulate yourself on facing the debt head-on to get a fresh start. With consistent intention, your freedom from debt will shift from fragile to firm. The diligence will pay off in financial stability, security, and peace of mind.

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