It is quite common today to find a lot of people filing for bankruptcy due to unemployment and hard financial times. Poor planning and unnecessary spending are one of the most common causes that the leads to bankruptcy. It is, therefore, important that you watch your budget and spending to avoid getting in such a situation. Declaring yourself bankrupt can work for you at that time, but it is important also to note that it will affect your credit and future purchases. Here are a few tips to help you avoid getting bankrupt.
Tips to avoid getting bankrupt
Reduce the use of credit cards
Credit cards are quite essential and can help you in a great way if used responsibly. If not, it can plunge you into serious financial difficulties. Avoid opening several credit accounts as it will tempt you to spend on things you do not need. If you really need to use credit cards, keep them to a minimum. Doing so will not only control your spending but also reduce the chance of you getting into serious debts.
Set an emergency fund
No one knows what tomorrow holds for us it is, therefore, good to plan for the future. A lot of financial advisers recommend that you set some cash aside as emergency funds for hard times. Having the extra cash to spend will help you to avoid borrowing and getting into debt and using credit cards since you will be spending money you already saved.
Settle your debts
No matter how hard you struggle financially, try as much as possible not to fall behind on paying your bills and debt. Make your debts a priority each time you get extra cash to spend. Different people have different ways to settle debts. Some will settle debts after meeting their other needs, while others will pay up debts first thing when they earn. Ensure that whatever approach you decide to take works for you.
Live with your means
It is important to weigh your financial muscles and know where you fall. Doing so will enable you to evaluate priorities from nonpriorities when making a purchase. Avoid extravagant spending and falling victim of peer pressure of wanting to own something you saw on television or a friend. Do not spend more that what you own. Have a budget that synchronizes with your income and if possible cut on spending and set some aside as savings.