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The following guest post comes to us from Bailey Harris. Bailey writes about home owners insurance and other finance related topics for www.homeownersinsurance.org.
Financial freedom is helpful in achieving a state of happiness and is among the most sought after and satisfying of human conditions. Unfortunately, if you’re not careful with spending habits, you could find yourself approaching that dreadful time when your debt threatens to overtake your income. If it does, bankruptcy is an option in extreme cases but is almost always something to be avoided. If the threat of bankruptcy looms, the following five suggestions could help you relieve the stress and avoid the pitfalls of filing.
Of course, the best way to avoid bankruptcy is to not let your spending exceed your income. Pay attention to your bank statements and balance your checkbook every month. Don’t get caught up in the “keeping up with the Jones’s” mentality. If you can’t afford a new computer or that vacation cruise, don’t spend the money. Instead, upgrade your present computer and take day trips to local points of interest.
Pay Your Monthly Debt
If you find yourself falling behind on your monthly payments, take steps to stop the bleeding as soon as possible. It may hurt, and you may have to go without some things you deem necessary, but once you owe more than you bring in it’s tough to control. You find yourself playing catch-up and can continue to fall further and further behind. Pay your bills as they come in.
There is no shame in facing financial difficulties. Everyone makes mistakes or goes through hard times. The shame lies in ignoring the situation until it’s too late. Sometimes it becomes necessary to seek the counsel of someone who’s been through your situation, or better yet, a credit counselor, a professional trained to deal with the trauma of owing more than you are capable of paying and who can advise you in ways to alleviate the problem.
A credit counselor can not only help you find a way to pay your debt, but can also work with the people you owe to develop a payment plan that will be mutually beneficial. After all, bankruptcy not only hurts you, your creditors don’t get paid. It’s in their best interest to be as patient as possible. Another important point is to listen to your counselor, and take their advice…they’re there to help you.
It may sound simple, but the key to paying off debt and avoiding bankruptcy is to make sure your cash income is greater than your cash outflow. It’s not just a matter of overspending, but once you fall behind it’s necessary to actually cut your spending. That may require a few sacrifices. Sit down and take stock of your spending habits. Beyond the necessities, such as food, clothing and shelter, find ways to save a few bucks here and there. Instead of renting a movie
every night, watch broadcast television. Eat at home instead of restaurants. Wear that dress or shirt or pants a few more times, and resist the urge to buy the latest and greatest video game.
Remember, a bankruptcy will affect your credit for years to come and should be avoided if possible.
Lumping all your debts together and making one payment a month instead of several may help you manage your financial affairs in a positive manner. This could involve taking out a consolidation loan, an option only if you’ve managed to keep your credit score up, which is another reason to avoid bankruptcy. This calls for will power on your part, a mental and emotional decision to overcome your previous bad spending habits and make a dedicated effort to crawl out of a financial hole and avoid bankruptcy.
How about you all? What methods do you use to stay out of the debt trap? Do you have any techniques you can share with the community that helped you significantly?
Share your experiences by commenting below!
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