The most important step you can take to repair and rebuild your credit after filing bankruptcy in Canada is to save money. Why? There are many reasons:
- Immediately after bankruptcy in Canada you don’t have credit cards or lines of credit, so you need cash in the bank to act as an emergency fund. If you need to make care repairs and don’t have credit, cash in the bank is a life saver.
- If you want to finance a car after bankruptcy, the larger the down payment you have, the easier it will be to finance the car. Cash is king; the more you have, the easier it will be to finance a car or other large purchase.
- Finally, cash in the bank is peace of mind. Knowing that you have cash to cover an emergency will help you sleep better at night.
Here are our top five tips for saving money after bankruptcy:
1 Plan ahead. Decide right now what you can afford to save each month. You may decide to make a household budget, or just simply keep track of your regular expenses. Either way, determine what you can afford to save each month. Set a goal. Make it realistic. If you were paying $200 per month to your bankruptcy trustee while you were bankrupt, make a goal to save $200 per month. You were able to do that for at least nine months in your bankruptcy, so you should be able to keep doing it.
2 Hide it. Once you set your savings target, put the money somewhere where it’s not easy to get at. Putting your savings is a glass jar on the kitchen counter is not a good idea. The jar method is fine for your weekly expenses (so you can see what you have left to spend this week), but having cash on the counter makes it more likely your teenage children will help themselves to the cash, or more likely you will be tempted to spend it because it’s sitting there, easy to access.
“Hide” your money by putting it in a savings account at your bank, or even a Tax Free Savings Account. Don’t add your savings account to your debit card. Make it difficult to get the money. If it’s not attached to your debit card you will need to go into the bank to get it, which makes it less likely you will use the money for an impulse purchase.
3 Make it Automatic. If you have to go to the bank every payday to deposit your savings you won’t do it. It’s too much work. So make it automatic. If you get paid every two weeks and you want to save $200 per month, ask your bank to automatically transfer $100 every payday from your main chequing account to your “hidden” savings account. With an automatic savings plan you will never forget, and since the money leaves your main bank account every payday, you won’t even miss it.
4 Get on the same page as your spouse. If you want to save and your spouse want’s to spend, your savings plan will fail. Talk about it with your spouse, and set realistic goals. If you both agree that in the future you want to buy a car, or a house, or save for your children’s education, or save for retirement, it will be easier to set aside the money for savings. Saving money is difficult, but if you both agree on why you are doing it, and you are saving a realistic amount, you will succeed with your savings plan.
5 Reward yourself. Savings should not be a chore; make it fun. Set short term and long term goals. A short term savings goal could be “we want to save $100 so we can go out for a nice dinner for our anniversary next month.” That’s a good goal, and you will both look forward to the reward for saving the money.