Avoiding Bankruptcy -

     Avoidance of bankruptcy starts at an early age. Living in a free society can often have deleterious financial ramifications, especially when coupled with an explosion of available credit. Undisciplined use of such credit can put the debtor on a downward financial trajectory early in life. As an example, college students, having little or no income, and already up to their teeth in debt with student loans, are inundated with alluring credit card offers. This marketing hype may offer free bonus points, trips to the Caribbean, free pencil and pen sets, and no payments for one year. These can be tempting, especially to students seeking a piece of the good life portrayed by these ads. This temptation should be resisted.

     A lifetime of prudent personal financial management can be enjoyed by following some of these simple tips.

Be Careful of What you Sign

     Be sure to read the fine print. For instance, be sure that you know how much you are really paying for an item when you pay in installments or on a credit card, and what the interest rate is. If you cosign a loan for a friend or relative, be sure that you know the financial implications first.

Avoid High-interest Credit Cards

     Some of these can be as high as 30% or more, and could take 20+ years to pay back. Be sure you know what the penalties are. Even with federal credit-card disclosure and other regulations, this is a surefire way to get mired deeply in debt, sometimes to the point of no return.

Be Sure to Have the Proper Insurance

     There are many hazards in modern life. A person can be in a major automobile accident, have a life-threatening illness or disease, be the victim of either a violent or white-collar crime like identity theft or a Ponzi scheme, face loss from a major natural catastrophe like fire, hurricane, tornado or earthquake, or a bad business decision. The financial fallout from some of these risks can be minimized by having proper insurance to provide a safety net in the event of loss.

Avoid Extravagant Lifestyles

     Many billionaires lead simple and frugal lives. In fact, Warren Buffett, one of the wealthiest people in the world, has lived in the same old house and drive his own car to work in Omaha, Nebraska, for many years. These folks eschew the drivers, limousines and other trappings often employed by persons of substantial wealth. Although this may not be the fad among young adults, who may consider it corny and passé, it may be good prudent advice. Vices and temptations as part of a lifestyle can cost you money and may lead to bankruptcy down the road.

Pay Taxes and Other Bills on Time

     Failure to do so can lead to the imposition of draconian penalties and other costs.

Save Money

     Most individuals live paycheck to paycheck, and don't really save any money for a rainy-day or for retirement. Experts recommend that people put aside into savings a reserve for at least 6 months. Setting up an IRA at an early age can be very beneficial in later years, in addition to providing certain tax benefits.

Make Good Financial Decisions

     Risky decisions can lead to financial ruin. Don't "put all your eggs in one basket" be sure to diversify your portfolio. Avoid being sued.

     In conclusion, there are many ways to avoid being one of the millions of persons signing a bankruptcy petition each year. Just following these simple, basic guidelines may prevent you in future years from needing to file bankruptcy.

Written by Henry Rendler