Hundreds of thousands of Americans file for bankruptcy every year due to a lack of income, medical emergencies, the loss of a job, etc. No one wants to declare bankruptcy, but it’s not uncommon for people to be overwhelmed with unpaid debts and bills with unforeseen circumstances. While bankruptcy isn’t the end of the world, it’s certainly best to try and avoid it. We’ve compiled a list of a few tips that can help put you in a better financial position and lower the likelihood of bankruptcy.
Organize a Budget and Cut Unnecessary Spending:
Create a budget to show monthly or weekly expenses based on your income. Outline how much gets spent on groceries, clothing, bills, gas, etc. After you’re done outlining the essential expenses, create a budget for fun money, as well as an emergency savings fund. A detailed budget plan will help you understand where your money is going, where you can cut spending, and will help you save for emergencies.
Bills can quickly pile up, and before you know it, you’ll have months of utilities, phone plans, rent, and other things to pay all at once. To avoid this, try paying them as they come in the mail. Alternatively, set up automatic payments to avoid late fees and bills piling up. After paying bills, you can go through your budget and plan the month or week accordingly.
Consolidate or Settle Debts:
If you’re not careful, loans and debts from schooling, home, and car purchases, and credit cards can become overwhelming. In fact, it’s what causes many people to file for bankruptcy. If you feel like you’re starting to drown in your debts, consider consolidating or settling your debts. What is debt consolidation, and what does it mean to settle your debts? Debt consolidation means taking out a new low-interest loan to pay off the others. Settling your debts is when a debt forgiveness agency negotiates with creditors to help you pay off a portion of the loan right then and have the rest forgiven.
Build an Emergency Fund:
You never know when a circumstance will arise where you need to pay a large sum of money. Whether it’s a medical emergency, repairing a car, fixing up your house, or losing a job, it’s always a good idea to have some extra money put away. Add an emergency fund to your budget and put a bit of money in each time you receive money. Over time you’ll be able to have an extra cushion you can rely on in case of an emergency.