When individuals or businesses cannot meet with their financial obligations, many make the assumption that the only solution is bankruptcy. That is not always the case though.
If the right steps are taken from the beginning, you can keep yourself and your family out of financial trouble and away from bankruptcy.
First off, start by educating your children. Many of us growing up weren’t presented with the tools and knowledge to establish and maintain good credit and keep away from the scare of bankruptcy.
Parents need to be honest with their children about finances. Teaching children that hard work, no matter the job, has its rewards and if you spend on a budget, there will never be a fear of bankruptcy.
Establishing a budget is also key in the prevention of bankruptcy. You cannot spend what you don’t have. Many people today have multiple credit cards and are in essence spending money they don’t actually have, plus more for interest.
So much so that people are paying off credit cards with credit cards and causing a terrible chain reaction. Spend what you can afford, after the bills are paid.
But you will want to make sure you have something socked away for an emergency. Something along the lines of two thousand dollars is a good base to have stored away for an emergency.
It is another step to take to keep out of financial trouble. Probably the most important thing though is to watch your bank account. Don’t get yourself into a situation where you are overdrawn.
The fact is more than a third of adults rely on their banks overdraft to keep them going on a month-to-month basis. Such actions are ones that lead individuals on a path to bankruptcy.
July 17th, 2008 at 10:49 am
I am affraid this is the western world for you where people spend well beyond their means. Saving for items now seems like a concept of the past.
September 9th, 2008 at 3:58 pm
Great information on teaching your children how to budget. My parents were always big on “If you don’t have the money for it, you can’t have it.”
It is amazing that 1/3 of people rely on overdrafts. wow.
Bankruptcy is like a Bad Tattoo…hard to get remove from your record.
People need to teach children the basic lessons of how interest works as well. If you lend me $100 and I make you pay me back $110, you are out $10. They need to understand that all the little things add up.
It’s like a death of 1000 cuts. You don’t actually see the money leaving your wallet when your bank tacks on fees, but it is gone. It’s unfortunate that people have to turn to bankruptcy. But with 986 BIllion dollars in revolving debt in the US, we might be seeing more and more.
October 28th, 2008 at 5:02 am
I agree that paying off credit cards with credit cards is a really bad idea. I had a friend do that at one time. He got up to his ears in debt.
November 14th, 2008 at 12:20 am
those tips are really good but in many time its difficul follow them.. i tryed several times but i lose too much money many time and now when i see an oportunity i will invest all.
sometimes i think is experience and other times i thick that i am a little bit crazy
November 28th, 2008 at 7:26 am
Great article – I would also add that in order to get your financial household in order – (i.e. creating a budget), one must first get their emotional house in order to deal with their financial reality.
February 4th, 2009 at 12:58 pm
I think a major contributor to the problem is that people do not want to face BK and take it on, rather they would drag it out and avoid creditors. Although I am not facing a BK, I did want to negotiate my credit cards which I did. I will vouge for the idea that you need to educate yourself and take it by the horns so it doesn’t turn disastrous to you.
Time to live within your means. Budgeting is a good tip. Sounds so easy but most people avoid this also.
February 24th, 2009 at 8:34 pm
In tough economic times such as these avoiding Bankruptcy is one of the best things you can do.
March 14th, 2009 at 9:10 am
It is quite right that education is key to this. With all of the trouble surrounding the banks and their lending practices recently, bankruptcies will go through the roof soon but will lessons be learnt? There is a lot of talk about more regulation in the banking sector which will obviously stop those people who haven’t learnt from the past. this will stop them from getting the credit in the first instance if they clearly cannot afford it
March 16th, 2009 at 8:37 pm
Great article! Bankruptcy is not always the best option, and many people don’t realize that. I really like your education idea and being able to manage a budget is extremely important.
April 30th, 2009 at 3:04 am
One of the issues is that, the more you borrow, the more you need to borrow. Once you start using credit cards, you are then paying more money for all of the things you purchased on that card since you are paying interest. Your money doesn’t go as far and you are left needing more money, which you don’t have. So you borrow more. And the cycle repeats, until eventually your credit is not as good and you can only make minimum payments. Then, you need to borrow more money and you have bad credit so you get charged higher interest rates, and things get worse. The best thing to do, and the best way to avoid getting sucked into this trap, is to never start using credit at all.
May 8th, 2009 at 8:57 am
Bankruptcy, for many, is the only option when things take a turn for the worse.
The current economic climate will most certainly lead to many more bankruptcies.
June 26th, 2009 at 4:56 am
The tips provided by you are very useful in today’s time where economy is going very down and many renown companies are being declared bankrupt.. thanks for your this great effort.
September 25th, 2009 at 1:29 pm
The fact is more than a third of adults rely on their banks overdraft to keep them going on a month-to-month basis. Such actions are ones that lead individuals on a path to bankruptcy.
September 30th, 2009 at 10:54 pm
Thanks for the great tips. I started on my business career at a very early age and within 3 years was on the brink of bankruptcy. Fortunately I used tips just like this to avoid it and am I ever happy I did. Now I look back on a great learning experience.
January 26th, 2010 at 12:08 pm
Nice post, that’s what I need. I always avoid overdrafting.
March 9th, 2010 at 1:51 pm
“a third of adults rely on their banks overdraft to keep them going on a month-to-month basis” quite an astonishing figure there. I didn’t know that.
April 4th, 2010 at 3:39 am
Its unfortunate that people out there have more than one credit card. We should educate our young on the use of credit cards and discipline when it comes to money so that they can avoid bankruptcy. Most young adults get a credit card as soon as they begin working and place themselves in debt that spirals downward and can last years.
May 6th, 2010 at 12:17 pm
Your article is very much useful because financial crisis still open. Everyone should take care to avoid bankruptcy.