5 Simple Ways to Avoid Bankruptcy
Hi everyone.
As a bankruptcy attorney, I see so many cases for people who file, who make good money, but bad decisions. It goes against my business model, but as a counselor, I'm going to share with you ways to Avoid bankruptcy!
1. Make a budget and stick to it.
Try this for one week. Write down everything you spend. Everything from that morning coffee on the go, to the magazine subscription, to the cable bill, Netflix, Redbox, and trips to the movies. Don't forget your meals, groceries, eating out, the bar tab etc. You would be surprised on how much you just blow through on insignificant items. Now, make a list of expenses in order of priority. Shelter, food, clothing (necessity only) monthly credit card bills, student loans, medical bills, and so on down the line with the discretionary items at the bottom. Now, look at what you take home as income. Now, redo your list and trim out the items that you don't HAVE to have. Pack a lunch, Bring a mug of coffee from home, eat out once a week, or better, once a month. You can see where you can save money. Now, the hard part, STICK TO YOUR BUDGET! Share your reasons with family and friends and they can accommodate your plans to get out of debt. Movie night in with a group, for instance, is a great way to save money, dine in, and spend time with family and friends all in one! For people that have trouble budgeting, there is a system called the envelope system. Put all your money into envelopes for each expense, and you can spend each envelope until it's gone. IF you need more, you can borrow, but you'll have to make adjustments to your other budget categories! Don't forget to budget in savings as well, never too early to get on that track.
2. Don't buy luxury items such as a brand new car.
You've heard the phrase "house poor" Don't buy over your head. Buy/rent the right size house or apartment for your needs. (Utility and maintenance costs will reduce too with size). Choose the right, affordable neighborhood. Don't buy a new car! We all know the value drops the second you go off the lot. Do your research and buy a reliable car. Pay cash if at all possible, since these are rapidly depreciating assets. Buy a reliable beater to free up cash. (Have the car checked by a mechanic). You can always move up in car later when you are out of debt. If you must finance, never lease a car either. The cost is just too much, and you get nothing at the end of the lease.
Don't get all the bells and whistles. For instance, do you need that in-dash navigation? 90% of the time you drive, you know where you are going anyways!
3. Pay your highest interest rate debts first.
This will help you pay off the most debt for the lowest price. Even if you have a smaller account, if it has a lower interest, you'll pay less in the long run if you attack the highest interest first. Some people want to clear one account first, and some people need that motivation, This is fine, but to pay the least back, attack the highest interest rate first.
4. Maximize your income.
This may seem obvious, but it is often overlooked. You can always ask for a raise, but be humble about it. Show the employer that you care about the company, and want to move forward, and ask how you can increase your income while doing so. Sincerity goes a long way. You can also look for a part time job. It's short term. Bust your butt and reap the rewards. Keep the big picture in mind. Deliver pizzas, stuff envelopes, be a waiter or waitress.
5. Cut up your credit cards!
It's Obvious. This should be the first step. Stop going further into debt. Cut up the cards. Negotiate better interest rates. Look to refinance your home when the interest rates are low. Talk to your bank and have them close your accounts too once they are paid off. Use your debit card or envelope system to pay your bills. This way you can use all available income to pay down the debt to be debt free as soon as possible.
Bankruptcy is an easy way to get out of debt, but it usually doesn't fix the problem. Fix the problem and you may not even need to file. Feel free to contact me if you do need to file, if there is truly no way out. Best of luck to you!
Terry
