Nobody wishes to fall on bad financial times. However, almost every single individual who has filed for bankruptcy due to an excessive amount of debts has made a few common mistakes and taken unnecessary risks which have resulted in them looking for a bankruptcy attorney. If you wish to avoid such a situation, it is important to learn from the mistakes made by others. According to Dallas based bankruptcy law firm Recovery Law Group, if you have filed for bankruptcy and gotten a discharge for your debts, you need to ensure that you make amends and improve your credit rating. This can be done by avoiding making the same mistakes over and over. Some of the most common mistakes which lead people towards bankruptcy include:
- Keeping a monthly balance on credit cards
Most credit card companies charge clients 15%-28% interest on monthly balances. When you compare this to mortgage loans (nearly 4%) or car loans (2%-6%) you will find the rate exorbitantly high. Most people filing for bankruptcy owe huge credit card debt for their condition. In case you do not clear your monthly balance, you end up paying much more than you can afford. The balance keeps on adding every month eventually leading to bankruptcy.
Avoid using the credit card and instead, use a debit card. This will not only reduce the interest but will also prevent you from making unnecessary splurges.
- Spending without realizing the total cost
Most people buy stuff without realizing the actual cost of running and maintaining it. though a car loan doesn’t come at a high rate of interest, you need to add fuel, service, insurance, repairs and other additional costs and things go out of hand. The same holds true for property too. You can avoid making these purchases unless it is essential.
- Not having a monthly budget
One of the fundamentals of bankruptcy is a mandatory course in financial management. This is because people rarely plan and live on a budget. People should cut back on needless expenses and save the disposable income for a rainy day if they wish to avoid bankruptcy.
- No planning for retirement
Most people think that their social security benefits will help them in their old age. However, the amount you get will not be enough to live comfortably. Thus, it is important to save regularly if you wish to avoid falling into debt in your later years.
- Using retirement funds to repay loans
Most people are unaware that exemptions provided by state and federal government protect their retirement funds. Using money from retirement accounts to clear credit card debts will leave you without an asset and yet in debt. Moreover, credit card debts are discharged during bankruptcy.
- Not buying insurance
One of the worst things that you can do is not taking health or accident insurance. Generally, people don’t like to spend on things which are not likely to happen. However, when misfortune strikes, you end up accumulating a huge amount of medical debts which can send you spiraling down the road.
- Not looking for other earning options
Considering the economic condition prevailing currently, not looking for opportunities to earn extra money is a crime, literally. You should consider alternate earning options to support your lifestyle and save money.
- Neglecting health
Neglecting physical and mental health in order to improve your financial health will prove detrimental eventually. Not only will you end up harming your body and end up spending a huge amount of money on medical expenses.
Consult expert bankruptcy lawyers at 888-297-6023 to know more about the bankruptcy process.