Tips to Budget Your Money Wisely and Avoid Bankruptcy 

Seeing red in your budget is not fun, but it doesn’t have to be permanent. Here are a few tips to help you manage your money wisely and avoid bankruptcy. A Harrisburg bankruptcy lawyer will tell you that living beyond your means is a sure road to disaster. Start by making a budget and tracking your expenses. 

1. Track your spending. 

The quickest and most effective way to avoid bankruptcy is to know exactly how much money you’re making each month and how much you’re spending. This will help you set short- and long-term financial goals that are realistic for your situation. 

Figure out how much you’re spending by going through your pay stubs, bank statements and other records to get a clear picture of your expenses. You’ll want to separate your expenses into categories, such as necessities (rent or mortgage, utilities, food/grocery), extras (lattes, Netflix subscriptions, etc.) and savings (debt repayment, retirement contributions, emergency fund). 

Compare your essential expenses to your income to see if there are areas where you can cut back. This may mean putting off a vacation, buying generic food or even cutting out your coffee shop addiction. 

2. Make a budget. 

Creating a budget is one of the best ways to regain control over your finances. It forces you to examine your spending and decide if you need to eliminate unnecessary items from your life, like a cable subscription or a fancy coffee drink. 

Start by writing down everything that you spend each month, including fixed expenses like rent and utilities and variable expenses such as food and entertainment. Then, compare your total monthly spending to your income. 

If you find that you’re bringing in less than you’re spending, consider getting a second job or cutting back on non essential expenses. Then, use the money you save to pay down debt and meet your savings goals. 

3. Set aside money for emergencies. 

We live in a time when everyone needs an emergency savings fund. Unforeseen expenses like a hospital visit or home repairs, as well as sudden job loss, can leave you without an income for a while and could lead to bankruptcy if not addressed quickly. 

Experts recommend having an emergency savings account that can cover three to six months of expenses. It may seem impossible to save that much money, but any amount is better than nothing. 

To get started, consider eliminating any non-essential spending until you have built

up your emergency fund. That means no more streaming services or expensive cell phone plans, no dining out and no trips until you have enough saved. Remember, drastic times call for drastic measures. These aren’t fun, but they can help you avoid bankruptcy. 

4. Cut your spending. 

When you don’t have a plan in place for your money, it’s easy to get caught off guard by unexpected expenses. That’s why it’s important to monitor your spending and stick to a budget so you can avoid unnecessary debt. 

Start by calculating how much you bring in each month. Add in your paychecks, other income sources and any savings you may have. Then subtract your expenses to see how much you have left over each month. 

Next, consider ways to cut your spending. This could include eliminating credit card usage, lowering cable or subscription costs, buying less groceries, cutting back on restaurant outings and forgoing vacations. Be creative but be sure to keep in mind your goals and the bigger picture when making these sacrifices. 

5. Set goals. 

In order to budget wisely, you need to set goals. First, make sure you know how much you earn each month and what your expenses are (tracked in step one). Compare these two numbers to see if you are spending more than you are earning. If you are, make adjustments so that you have money left over to save. 

Consider setting short-term goals, such as paying off credit cards or moving out of the dorms into an apartment, and mid-term goals, such as financing a quarter or year-long study abroad program, and long-term goals, such as saving for a home or retirement. Review and adjust your budget monthly as needed. 

While unexpected medical bills or a job loss can put anyone in financial difficulty, many people end up facing bankruptcy due to poor spending and savings habits. Following these simple steps can help you avoid bankruptcy and live a debt-free lifestyle.