As part of your bankruptcy process in Ontario, you will be required to attend two credit counselling sessions. During one of those sessions you will learn about how to use a budget to balance your monthly cash flow. This can help you not only during your bankruptcy, but help you remain free from debt once your are discharged.
Budget: It’s not as scary as it sounds
“Budget” is a scary word for many people, but it is really a very simple concept. A personal budget lists what your income is every month, and what you spend your money on every month. It can be as simple as a piece of paper, or a budget can be a complicated spreadsheet done on a computer. However you prepare your budget, it is simply a list of “ins and outs” each month.
Here’s how to create a budget: get a piece of paper (or use a spreadsheet) and write down everything you spend money on it a month. Include obvious items like rent, utilities, car expenses, and food, and less obvious expenses like gifts and clothing that you don’t spend money on each month. It may be helpful to review your last two month’s worth of bank statements and credit cards statements so you don’t miss anything.
If you have more money going out than coming in each month, there are only two ways to bring your budget back into balance: increase your income, or your reduce your expenses.
How can I increase my income?
You can increase your income by doing the following :
- work more overtime if it’s available
- get a second job
- start a home-based business
- take in a boarder or room-mate
- ask for a raise or look for a higher paying job
Of course more overtime may mean less family time, so be sure to consider the implications before you agree to take on more work. For most people reducing expenses is a better alternative.
How can I reduce my expenses?
Start by reviewing your budget, line by line, and ask yourself: can I cut this expense?
Here are some suggestions:
- Reduce your housing costs, by moving to a smaller house or apartment, or taking in a border or roommate, or even moving in with family.
- Reduce your non-essential expenses, like cigarettes and alcohol. Quit smoking or reduce the amount you drink; you will be amazed at how much money you can save.
- Switch to basic cable; you probably don’t watch all those channels anyway. This may be more difficult in the winter, but should be easy in the summer when you spend more time outside and watch less television.
- Eliminate non-essentials on your phone bill like call display and call forwarding. Cut your long distance bills by calling over your computer using a free service, or look into a long distance plan.
- Cut your food bill by shopping for just what you need three or four times per week, instead of buying huge quantities weekly, which leads to throwing away a lot of food you don’t use.
- Buying a coffee maker and a travel mug, and make your own coffee each morning, instead of buying it.
Review your expenses, then cut them to free up cash to deal with your bills.
By dealing with your debts by filing bankruptcy, and improving your cash flow by following a monthly budget, you will be surprised at how fast you can recover from bankruptcy.
Talk to an Ontario bankruptcy trustee, and begin your fresh start today.