I was reading the newspaper earlier today about a sky rocketing bankruptcies in the state I live in. A rise of 27 percent. TWENTY-SEVEN PERCENT!!!! This number far exceeds the national bankruptcy average. Most of the bankruptcies are due to bad debt and more than half of the people filing for bankruptcy did so because of medical debt.
The simplest way to avoid bankruptcy is to not allow yourself to get in that situation. Here are some simple (but not always so easy) ways to stay out of debt.
Budget. A budget is a review of how much you make versus how much you spend. Ideally, the amount you spend should never be higher than how much you earn. Even simpler, don’t spend the money if you don’t have it. If you haven’t started a budget before, it is NEVER too late to start. First, make a list of all the things you always spend money on, i.e. car payments, utilities, house payment, etc. Then make a list of expenses that may vary, i.e. grocery/food, gas, entertainment. In addition to expenses, it is important to put money aside for savings. Even if it is only a little at first, it will continue to grow. It is ideal to have three months worth of living expenses saved up in case of job loss or another catastrophe. The hardest thing about a budget is knowing how much you need to allot for each expense. For one month, write down everything you spend. This will not only help you know how much you might need to spend, it will also help you pinpoint areas in your spending that can be cut down. For example, it might not seem like much to buy coffee and a bagel every morning. But that could add up to more than $25 a week.
Find a way to get cheaper expenses: refinance a car loan with a cheaper interest rate and find more inexpensive insurance (health, car, home and life).
Home and car insurance debt can be considered necessary debt, however credit card debt is not, especially those with high interest rates. If you already have fallen to the pitfalls of credit card debt, find a way to get out of it as soon as possible. After you evaluate your budget, find places to lower your expenses. This could include making meals at home instead of eating out or taking the bus instead of driving your car. Use the extra money to save and to pay off your debt.
While life can throw you unforeseen financial burdens, you will be much more prepared to handle them if you have a handle on you finances. Avoid debt, spend within your budget and start saving today!