Assessing Your Finances After Bankruptcy

Having a conceptual, and comprehensive, understanding of your finances will be the most influential force on your journey; beginning after your, “fresh start.” What exactly does this mean, and how much should you really know? You don’t need to know every little detail about your expenses. We most certainly do not expect you to remember all applicable numeric factors impacting your budget either. You won’t have to if you follow this one golden rule. Organize and structure your finances in a comprehensive and concise manner.

Comprehensive and Concise

Imagine all your finances right now, and try and account for everything: income, taxes, expenses, credit, interest, etc. the list goes on. This feels kind of overwhelming, doesn’t it? Remember the last time you read an incredible book, or watched a mind-blowing movie? There was so much detail it sucked you in, almost like you were physically in the story. Now in your mind summarize the story, starting with the important plot points and instances that ultimately built the foundation for that cinematic ending. In about a minute in a half, you could explain what took hours to show, and years to develop. Why? Because you procured all the small and intricate details from the story and summarized them into informative plot points, or in other words, you made it comprehensive and concise. Something you could easily understand. Your best tool, for organizing large amounts of numeric data is Microsoft Excel, putting everything into a spreadsheet. If you do it well and right once, this will be something you can quickly and easily reference when anything changes financially in life.

Expense Break Down

There are four major categories that you can organize all your expenses into:

  1. Fixed Expenses: Your fixed expenses stay consistent and do not change on a month to month basis. These payments are consistent and predictable and are crucial to your credit history, so they should be paid in a consistent and timely manner. For example, mortgages, loans, rent, and insurance…
  2. Variable Expenses: Your variable expenses are items and things that you consistently purchase each month, but the amount changes on a month to month basis. For example, utility bills, groceries, maintenance, gas, home supplies, and groceries…
  3. Periodic Expenses: Your periodic expenses are like fixed expenses however, they are paid less often and over a longer period. They are often fixed payments, just not paid on a month to month basis. For example, property tax, income tax, home insurance, and tuition…
  4. Miscellaneous Expenses: Your miscellaneous expenses are the small or occasional personal expenses usually made daily or weekly that add up over time; also including bigger personal expenses. Often these are things we can live without, but they are comforts. For example, morning coffee, lunch, dinner out, drinks, and vacations…

Data Collection

Create a rough outline/list of all your expenses and place them into their respective categories. The next step is to determine how much you spend on each expense and add up a total expense for each category. Note, how some of the categories are weekly, monthly, and longer. Make sure you find the total expense for each category respective to the time duration that corresponds to each category. For some of your miscellaneous and periodic expenses refer to previous weeks, months, or years if you can. This will be a lot of work and take some time, but we can ensure you, it will be worth it! Make sure to be honest with yourself about all your expenses, so that you can have the most accurate representation of your expenses as possible.

Data Input

Now, take all those expenses and numbers you have been calculating and input them into our sample Excel spreadsheet. Along with your different types of income and totals. This will give you a comprehensive and concise overview of your finances regarding your income and expenses.

Understanding Your Information

So, what is all this information telling you? Well to start the spreadsheet is acting as an interactive representation of your income to expenses. In the bottom there should be a residual balance total, this is either a positive or negative number. If the number is positive, good job! You are already in a good financial situation and are not spending more than you make. If the number is negative, don’t worry! Thanks to all your hard work and data collection you can now easily determine if you are slowly going into debt or not.

Either way, if your total is positive or negative, look at your miscellaneous expenses category; manipulate some of your expenses and see if changing some of your spending habits will impact your residual balance total. If changing around your miscellaneous expenses does not take your residual total out of the negative range, try to seek professional financial help. The spreadsheet can now give you a good understanding of how much money you can allocate per week, month, and year for certain expenses. All with an easy glance, now freeing your mind to think about other more important topics.