Do you need tips to avoid filing for bankruptcy? Everyone has financial problems at one point in their life or another. It may be caused by a divorce or medical emergency or a job loss. Although many people feel that bankruptcy is caused by someone being irresponsible with money that is not always the case. If you are considering bankruptcy, do not worry about what other people think. Before you decide to file, try these tips to help your financial situation and avoid bankruptcy.
- Design a realistic budget to see where your money goes each month. To do this, you will need to write down every dime you spend all month. This is not going to be fun, but the information may be quite an eye opener to you about where you may be able to cut your spending and pay your way out of debt. For example, if you spend $2.00 on a cup of coffee every morning on your way to work, that adds up to $40 a month or $480 a year. Most people do not stop to think about the impact such a small every day purchase has on their cash flow.
- Once you know where your money goes, see where you can trim your spending. Make a cup of coffee before you leave home instead of buying one every day. Cut your unused phone services or look for a cheaper cable television service. If you call your phone or cable service provider, you may find out about cheaper services that are unadvertised.
- To cut your debt, you must cut all spending except what is completely necessary, such as food, housing, and transportation.
- Selling personal property may sound like a drastic step, but you are in a drastic situation. If you are driving a new car, sell it and purchase an older model that will have smaller payments and will cost less to insure. Sell any recreational vehicles you have, including boats.
- Cancel memberships to gyms and magazine subscriptions. Do your own nails to save money on manicures. Now would be a great time to stop smoking or drinking (even a little adds up quickly) and curb your desire to eat out.
- If, after cutting spending to the bare bone, you still do not make enough to cover your expenses, look for another part time job. Everyone in the home needs to work together to dig yourselves out of the financial hole you are in. Use your hobbies to earn extra cash, such as selling baked goods or crafts or taking family photos. Offer babysitting services or to run errands for busy people. No matter what your talent is, chances are there will be someone willing to pay for that talent.
- If you still are not making any dent in your debt, a professional credit counselor may be needed. Be aware, though, that their biggest piece of advice will be to cut your spending and pay down your debt. You may be able to get your monthly payments reduced by calling each of your lenders (including credit cards) and explaining you are having a hard time right now but do not want to default on any debt. They may work with you so you can cover your monthly bills easier.
Once you have paid down your debt, design a realistic budget you can live with and stick to it. It is okay to plan a few meals out a month or to go to a movie, as long as you have the money to do it and are not skipping paying bills just to do so. Make sure your budget includes these fun activities, too, and a saving plan so if life sends another emergency your way, you will be better prepared to handle it.