Being up to your ears in debt is a terrible experience. Bankruptcy provides some relief but, all too often, the same people show up in bankruptcy court a decade or so later. This is definitely not what you want to happen.The only way to stay out of bankruptcy court is to learn to manage credit wisely. A credit card is not the answer to not having enough money; you can't borrow your way to prosperity.
In almost any city, you can find a course in managing credit. The basic rule is: don't spend more than you make. If that means you take the bus or drive a cheaper car than your neighbors, so be it. Don't feel bad about living within your budget. The moron driving by in a Hummer may be in bankruptcy court next.
Here are some more suggestions you'll hear from credit counselors and bankruptcy lawyers. (There really is a reason everyone says the same things.)
- Create a realistic budget and stick to it.
- Avoid sales. "Saving money" on a sale item often means spending money you don't have.
- Plan ahead. Go to Wal-Mart or Costco and buy larger quantities of food and household items.
- Downsize your expectations. Don't take on a mortage, rent or car payment you can't afford.
- Never co-sign or guarantee a note for someone else. You are liable if they don't pay.
- If your spouse is financially irresponsible, tell them they must straighten out or you'll divorce them.
- Get some kind of health insurance. You must have health insurance to cover you and your dependants against major illnesses. If nothing else, get a major medical policy with a high deductible and pay your doctor visits, etc., out of pocket. If you do this, pay your doctor cash and ask for a discount. If you don't get it, change doctors.
- Avoid high-risk investments and "get-rich-quick" schemes.
- Don't buy anything that's advertised on infomercials or e-mail spam. Don't buy anything from telemarketers. Buy only items you can hold in your hand before you pay for them.
- Don't be ashamed of being a skinflint. Most -- yes, most -- self-made wealthy people are tight with a dollar. Doing more with less is something to be proud of.
- Pay cash, ask for discounts. If you don't get them, take your business somewhere else.
If you want to keep your spending under control, it's essential that you make a budget. A budget allows you to get a handle on the flow of your money -- how much is coming in and where it goes out. With that information in hand, you can make intelligent choices about how to spend.
Keep Track of Your Daily Expenses. Keep it simple. Write down in a notebook what you spend everyday or every time you spend. If you know where it's going, you'll see clearly where to stop the wasteful flow of cash.
Cut The Waste. You know who you are you go the movies instead of renting them. You get your car washed instead of expending energy doing it yourself. Clean your own house you need the exercise anyway. Eat at home who knows, you might enjoy learning new things to do with Top Ramen. Get real life isn't "things."
Learn to "want what you have instead of having what you want." Trust me, it's a much more satisfying way to live than dodging debt collectors.