So you’ve gotten your bankruptcy discharge and all your old debts are forgiven.  You start from square one but chances are, you haven’t altered the way you budget your money, make money and value money.

Most Americans are one medical emergency or one job loss away from bankruptcy.  But it doesn’t have to be like that and in fact, it shouldn’t be.  We suffer from a deficit not only of money but of knowledge of how finances work and how it ought to work.

Here are a few things that you must do after bankruptcy so that your finances come out better the second time around.

Savings

You must have savings of at least nine months.  If you get laid off or there are unforeseen expenses, you need to have the money to pay for such things.  Your savings cannot be in the form of a home equity loan/line of credit, credit cards or your retirement plans.  You must have liquid, cash savings.  Figure out how much you need to break even every month and save up nine-months worth of expenses.

Insurance

You must have adequate and appropriate insurance.  If you have minor children or other dependents, you must have life insurance.  You must have health insurance.  If you cannot afford health insurance, there are programs such as the MassHealth Connector that will provide you with health insurance for little or no cost.  If you are 55 or older, you must have long-term care insurance.

Budget

You must learn to budget.  What does budgeting mean?  It means that you cannot spend more than you make every paycheck.  You can use credit cards for convenience and for reward points but every credit card bill must be paid in full at the end of the month.  If you don’t pay it off in full, you have not budgeted correctly.  It might be a small amount at first, but it’ll quickly spiral out of control.  Use an expense spreadsheet or budget calculator to help you.

Goals

You must set clear financial goals.  For example, if you have a 30-year mortgage, you should set a date in the future where you promise yourself to pay off that mortgage before you retire and before the 30-year mark.  That date should be a definite date such as January 31, 2025.  Do the same for a car loan or how much you want to save for retirement.  If you don’t have a date for your goals, it’s just a dream.

Retirement

You must save for retirement.  Even if you don’t think you have the money to put away, if you work for a company that offers a 401(k) plan and they match your contributions, you must contribute.  Since your contributions to a 401(k) are taken out of your paycheck before you even get it, consider it like you never had that money to spend.  A matching contribution to a retirement plan is free money.  You can’t afford to pass up free money.