Tuesday, July 3, 2007

Bankruptcy - Prevention Of Bankruptcy

What is Bankruptcy? It can be defined as the “inability to discharge all your debts as they come due.” Simply said, a person is way over his/her head in debt and can’t keep up with his/her payments.

This article intends to focus on prevention of bankruptcy. Although bankruptcy is legal, morally, it isn’t the best idea to get into so much debt that you cannot pay your bills. That is just not good character. Be a good citizen; be a good person; PAY YOUR BILLS. If you don’t pay your own bills, it makes things more expensive for everyone else, because we all have to bear a little piece of that cost.

Schools and parents need to teach children financial responsibility at a young age, so it is not a surprise when it’s time for them to leave home. The basics of this responsibility would include the 70/10/10/10 rule. Here comes money in: Be a good citizen and give 10% to a non-profit organization or church. Pay 10% to yourself in your savings account. Invest 10% in a money market account. And you will have 70% left over for spending money and bills. For younger children living at home, they may not have that many bills and can thus save up more money for a car, home, college, or other major future expense. It would be really great for a young person to have some money in savings in an emergency fund before they venture out on their own.

As a young person out on your own for the first time, you will need to establish credit but don’t go wild doing so. You need to prove to the credit card company that you will pay your bills. Upon receiving a credit card, it’s a good idea to not charge up more the 2/3 of your available credit, or else your credit score will go down.

Once credit is established, try to pay for as much as you can with cash. If you cannot afford something, wait until you get paid to get that item. Perhaps in the meantime you will realize that you don’t really want or need that item and can get along without it. Don’t give in to impulse buying. THINK with your head and not with your heart before you purchase.

If you don’t already have a savings account at this point, you will need to set one up as soon as possible. As for the amount to place in it, try to keep a $1,000 emergency fund, and more money is better. It is ideal to have a savings account that contains between 3 and 6 months worth of wages, just in case something happens to your job. Can’t afford to put $1,000 in at this minute? Start anyway. Start small, be faithful in your deposits (can you afford $10 a week?), and watch it build.

Try to save money with the purchases you make. If you can’t cover your basic bills and put 10% into savings, AND you see something you “must have” (but is probably optional), maybe you shouldn’t purchase it at this time. If you need a new chair for your apartment, ask yourself if it really needs to be “new” or if “used” would work. Start checking rummage sales and thrift shops for clothes, kitchen gadgets, knick-knacks, etc. And you know what? Let’s say, at this stage of your life, you absolutely cannot see yourself in used clothing (or a used chair or whatever). Think of it this way: if you are willing to economize in some areas of your life, you will have that much more money to spend on things that are more important to you! Good deal, huh?

Your vehicle can be a big money hog. Consider purchasing used instead of new. Did you know a new vehicle depreciates (that is, goes down in value) a couple thousand dollars as soon as you drive it out of the car lot? Be sure to spend the money to properly maintain it (oil changes, tune ups, etc.) so it will last as long as possible. Do you know what a “cool vehicle” is? Not an expensive one, but one that is …. PAID FOR! Nothing cooler than that! Then you can purchase a bumper sticker that says, “My other car is a Corvette,” ha ha.

Try to save money by recycling. Your monthly aluminum pop cans could buy you a pizza every month. Your empty ink-jet cartridges could get you free paper or discounted office supplies. Recycle paper properly even though there is no financial award for it. And you’ll be doing the environment, and your future, a favor as well. Think of how less full the landfill is because of your efforts!

Manage your “treasures.” If you have too many, have a rummage sale (that means money), sell ‘em on Ebay, or donate them to a non-profit organization, where you will receive a receipt that may be tax-deductible for tax purposes. Don’t spend money on storage units unless you absolutely have to. Remember, “He who has the most toys” doesn’t necessarily win, and certainly, “He who has the most debts” WON’T win.

If I’ve said it once, I’ve said it before: Be a good citizen; be a good person; PAY YOUR BILLS.


http://bankruptcy-guide-to.com/a/356361/Bankruptcy+-+Prevention+of+Bankruptcy.html