Don’t let yourself go bankrupt

I recently came across some statistics about bankruptcy rates in the US and UK. The slowdown in these markets over the last couple of years has deeply impacted income for individuals, many of whom have not taken steps to safeguard themselves.
A startling part of these studies, conducted independently in the two countries, was that the reasons leading up to bankruptcies were universal. They applied to not just the US or UK markets but also to the trends that we have been observing among people with rising aspirations in developing countries
Here are some of the common pointers that you need to act over (if you don’t want to end up filing for bankruptcy) -

1. Contingency Planning

I cannot stress on this enough. Contingency planning is the single most important component of safeguarding yourself against future problems. You need to create a plan for yourself now; one that will cover all possible problems that you can think will affect you. Common risks that people plan for include job loss, unforeseen medical expenses, untimely death, etc.

2. Debt Management

People sometimes tend to be lazy or ignorant about their finances. Adopting a “If you don’t see a bill you don’t have to pay it” attitude only makes debt pile up and tougher to deal with at one go. Make managing finances a part of our regular routine. Do not wait for the situation for the situation to go out of your control.

3. Lure of Easy Credit

Credit cards make life simpler; they ease your woes of going to an ATM every time you need cash. However, the simplicity of swiping your card for every purchase comes along with an increased probability of over-spending and buying things you do not really need. It does not take long before you are suddenly facing a bill running into lakhs on your credit cards with no way to repay the money.

4. Investing in only one medium

This is one of the few avoidable traits of investing which is generally caused due to lack of adequate knowledge. Often one starts investing in a fund or medium where we feel we can get the best returns. A close friend of mine used to rely heavily on investments in the share market. When the market crashed in 2008, all his saving were wiped off. He ultimately had to sell his house to pay off his debts.

5. Lack of Financial Planning

Ultimately is all boils down to this… most people do not realise the importance of creating a financial plan or charting financial milestones for their future. The high of spending money overtakes all other desires. Create a financial plan to know where you can splurge and where you need to save. It will give you a clear picture about how you can manage your money and set goals for yourself.

Don’t go bankrupt… make you nurture your finances and stay away from debt piling tendencies…