Bankruptcy can happen to anyone, anywhere. It does not matter how rich you are or how poor you are. In many cases, bankruptcy has nothing to do with your income. Instead, it has everything to do with your spending habits and nothing else.
One of the most important reasons you may be considering bankruptcy is because you can’t manage your debt. Either you have too much debt or you don’t have enough money to pay it off.
If you are already in a financial position that is considered critical, you may reconsider your options. Remember that bankruptcy is not the end of your financial life. It can give you a fresh start, but it will take some time. Therefore, you want to do things right the first time.
The following are some tips on how to avoid bankruptcy if you can.
Be aware of your spending habits.
If you are already in debt, you may have little or no money to indulge in extra splurges or buy something you really want. If this is the case, you may want to consider cutting back on your expenses. Are there areas in your life you can do without? You may want to consider losing the gym membership or the cable television. Or you may want to consider working a second job in the evenings or on weekends. There may also be opportunities in your city that you can utilize that would help you boost your income.
Create a budget and stick to it.
Many people create a budget so they know what their monthly expenses are. This includes food, bills, and entertainment. It can be a tedious task to create this budget, but it can be a vital step to manage your finances. Successfully creating a budget can be a challenge, but it is one of the most important steps to take if you are to avoid bankruptcy.
Seek the advice of a financial expert.
Some individuals may be able to cut back on spending and manage their finances on their own. If you can do this, you should find a financial advisor so they can help you make an informed decision on your affairs. They can help cut back on your expenses and help you make smarter spending decisions. Sometimes, like with counseling services, a financial advisor can counsel you on areas you may not have considered. This may include potential tax savings and retirement planning.
Create a plan for your future.
If you are considering bankruptcy, you probably already explain to a bankruptcy attorney what you want to do with your money. There are probably several steps you need to take during bankruptcy that includes planning for your future. You may not be able to stay out of debt, but you can make sure you will not be in a position of living paycheck to paycheck and consequently fall into more and more debt.
Commit to a few small steps that begin to make a significant change.
If you know that bankruptcy is in your future, it may be wise to set a small financial goal. For example, you can cut back on your spending for one year and save up a reasonable down payment for a house. You might have to work a second job for a while or cut back on #1, but it’s important to commit to a small goal. This can also be important psychologically – if you set a small goal and reach it, it can boost your self-confidence. And, if you reach it, you may be able to avoid bankruptcy in the future.
Make sure you have an emergency fund.
An emergency fund is crucial to making it through life with a lot of unseen expenses. If you hit a rough patch and have unexpected emergencies or accumulate a large emergency fund, you will be better off. You may have to take a pay cut or sell something to have the money, but when you have it, you will be better off.
Do not rely solely on the advice of a bankruptcy attorney. They serve as a personal assistant and guidance for you. They may know of a certain financial strategy or a loan that may be beneficial. However, they are not exclusively that point of pride and advice. Their basic information can benefit you throughout your bankruptcy as you are going through the process. Therefore, make it your goal to consult with an attorney whenever possible. He/She will be the decision-maker for you and will have a stake in your progress. They will want you to succeed as they will have a degree of what the process entailed once you have finished.