When faced with massive debt, bankruptcy may be the best option to get your finances back on track. With chapter 13 bankruptcy, you must make payments as obligated by the court to ensure you remain in good standing. This entails creating a reasonable budget, which can be difficult for many people. In this case, U.S. News & World Report offers the following tips.
The first step is to track your expenses. This will give you a good idea of your debt to income ratio. If you commonly use cash to make purchases, try switching over to a debit card for the period you're tracking. That way you can use your bank statement as a guide for how much you typically spend. It's best to get a general idea of your finances, so don't worry about tracking every little expense at this point.
Next, think about your financial goals. Of course, you want to pay down your debt as soon as possible, so that will probably be a priority. However, don't neglect other goals you may have, such as building up your emergency savings or planning for a vacation. Having a goal in mind is good, as it provides motivation to change problem spending habits. However, you want to be realistic about how much it will cost to reach your goals.
From here, you can look at ways to cut unnecessary expenses, which can free up money for savings. In the same token, look for ways to increase your income so you have more money to work with each month. Many people use a 50-20-30 budget. In this case, 50% of your income would be devoted to things like house payments, food, and debt (including your repayment plan). 20% of your income should be devoted to savings and other debt, while 30% can be used for entertainment, such as dining out.