Unless you are a Saint, you are bound to make a mistake or two in your lifetime. The mistakes that you have made can be insignificant or it can be a life changing event. You can make a huge mistake by accumulating so much debt that you only choice out of this jam is to file for bankruptcy protection, or you can make a tiny mistake such as forgetting about your son's first birthday. Filing for bankruptcy shelter is absolutely a life changing event and most people would not want relive this ordeal in their lifetime. If you had to file for bankruptcy protection, what led you to this financial crossroad, and what do you plan to do to fix this in the future?
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Poor budgeting and not watching out what you are spending and how much you are spending can be a major contributor to those who had to file for bankruptcy shelter. Poor financial planning can take the form of many scenarios. During the real estate bubble of the 2000s, many people got into deep financial debt because they bought homes they cannot afford. Even if you are making a lot of money, for example, $10,000 of net income per month. But if you ended up spending more than $7,000 on your home related expenses, can you live off the remaining $3,000? A good rule of thumb is not to spend more than 30% of your income on housing expenses.
By not living within their means, some people find themselves in a financial hole that they had to file for bankruptcy protection. In simpler terms, this means that you are spending more than you are making. During the mid 2000s and even the time leading up to the recession of 2008, using credit cards seems so easy to everybody. People who find themselves with a mountain of credit card debt forgot that charging purchases on credit card does not mean that the debt do not need to be repaid over time. Buying things or services using credit card does not mean that you do not have to pay for it, it just lets you pay for it at a later date. It is a useful tool to help you purchase that new TV that you have always wanted. In order not to abuse the credit card use, you have to know that you can pay for this new purchase in reasonable amount of time. You will know if you cannot afford to pay for this new purchase, because you are hoping to pay for this purchase using the minimum payment on the credit card bill.
The majority of the people who had to file for bankruptcy tend to abuse their credit cards. And to make matters worst, some of these people even use the credit cards for daily living needs. Can you imagine someone who is already heavily in debt, and yet he or she has to use the credit card to buy that food or shelter for the day? Cash advance from the credit card is one way that people tend to abuse the credit card usage. Cash advance is one of the worst financial transaction one can incur in his or her lifetime. The drawback to using the cash advance from the credit card include extraordinary high interest rate which means you will have even a harder time paying back this debt. Some people will justify this action by promising that this is just a one time occurrence. Those cannot manage their finances properly tend to find this cash advance way as an "easy" way to get by from month to month.
For those who are thinking of filing bankruptcy, or have filed for bankruptcy recently, here some advice that you should adhere to (coming from a person who had gone through this ordeal):
You should only spend on what you have earned and not more Create a budget and use it wisely so that you can follow rule #1 Saving money is the best thing you can do, just in case you will need it one day
The objective to filing bankruptcy is to give yourself financial relief from the wrath of the creditors. Filing bankruptcy is not a get out of jail free card, like the one from monopoly. You should not use it as a way to wipe out your debt so that you can accumulate debt again. Take this chance given to you and rebuild your life without the massive debt hanging over your shoulders each and every day. Look at this from the positive side at all times, instead of focusing on the negative aspects of filing for bankruptcy. If you are uncertain of what is involve in the bankruptcy filing, seek the advice of a local bankruptcy lawyer near you.
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