While many people deal with the occasional financial crisis, others continue down a path of poor debt management and poor spending habits that could eventually lead to bankruptcy.
Do any of these apply to you?
1. You do not have a budget or you don’t stick to your budget.
Impulsive spending and living beyond one’s means is one of the greatest threats to financial security. Prepare a reasonable budget that you can live with, and allow a little room for flexibility. Maybe give yourself a very small allowance each week for impulse purchases instead of spending money you cannot afford to spend. A good way to gauge your habits is to write down everything you spend for one week. Write down the amount and every item you purchase. You might be surprised how quickly small splurges add up.
2. You have no savings, investments, or rainy day funds.
If accident, illness, or some other type of emergency strikes, or if you lose your job or get laid off, your financial situation will quickly go down hill. If you don’t have anything to tide you over until things get better, you could soon find yourself looking for a bankruptcy attorney. No one expects these things to happen to them, but they can and do happen. Try to put away at least a little something from every paycheck and look into low risk investment tools.
3. You do not have appropriate insurance coverage.
This includes auto insurance, health insurance, homeowner’s insurance, and life insurance. The first three will affect you directly. The latter will affect your loved ones when they are forced to pay off your debt. Seek insurance quotes for affordable coverage. Often, if you place all of your policies with one agent, you can expect discounts. Ask about discounts.
4. You have taken out a home equity loan or home equity line of credit that you really cannot afford, yet you continue to use the credit.
If anything goes wrong, you could lose your home. Try to pay off what you owe quickly, and do not use any more of the borrowed money. Do not make only the minimum payments. Find some area where you can cut back so you pay at least a little extra against the principle each month. This is especially important if you have a variable interest rate.
5. You live paycheck to paycheck.
This is a scary way to live as you probably can attest. One unforeseen problem and things can get ugly fast. If your car breaks down, if you become ill and miss work, or any number of other unexpected problems could find you buried under a mountain of debt. Do your best to cut out any expenses that are not absolutely necessary. You may even want to consider taking on extra part time work until you are able to pay off some debt.
If any of the above items apply to your lifestyle, now is the time to make some changes. While bankruptcy does not inflict the stigma it once did, it is probably still not something you want to consider. Also, while some people have received relief through filing bankruptcy in the past, bankruptcy laws are changing, and not in the consumer’s favor.