SIX WAYS TO AVOID BANKRUPTCY AND CREATE LASTING WEALTH

 

Everybody makes financial errors. Sometimes the price of those errors causes us to dig a hole we can’t get out of.

Even though declaring bankruptcy is embarrassing, sometimes all it takes to get your finances in order is the gift of a new beginning. The majority of bankrupt people I’ve encountered went on to amass fortune because they learned from their errors and changed how they handled money moving ahead.

Personal finance is not taught in schools; you are not taught how to set up a budget, make investments, or manage your money. You aren’t taught how to move up the economic ladder from the middle class to the wealthy, for sure. So, if you’re in bankruptcy right now or you just got out, use these procedures to start over and rebuild your financial life.

IMPROVE YOUR INCOME

Without consistent income, it’s challenging to maintain your financial stability. Prioritize stabilizing your income from work or self-employment.

That can include searching for a new position, which calls for cleaning up your resume. In turn, that might necessitate obtaining some new qualifications or other proof of your field’s proficiency. Do everything it takes to put yourself in the greatest position to succeed in your field, even if it involves gaining new knowledge.

Investigate creating a side business as well to increase your income. Consider a second job in the real estate industry if you love it, but don’t feel limited to it. Your alternatives are as endless as your creativity, from consulting to freelancing to driving for Uber.

RESTRUCTURE YOUR BUDGET TO INCLUDE SAVINGS

Most people have a bad approach to budgeting. They start by making a list of their expenses, after which they consider their options for potential savings at the end of each month.

Throw away the current budget you have. Instead, take a look at your net monthly income and decide what percentage you will allocate to savings and investing. You make that “cost” your top priority.

The amount you wish to spend on additional expenses, such as accommodation, transportation, groceries, entertainment, clothing, and so forth, can then be planned. Not what you’re already spending, but what you aspire to spend. You need to cut back on how much money you’re probably spending on several of these.

Yes, to get the riches you desire, significant lifestyle changes may be necessary. You could need to relocate, make modifications to your house, or part with a vehicle. You need to increase your savings rate if you’re serious about accumulating wealth.

SET UP SAVINGS AUTOMATION

Your savings should be deducted as soon as you receive a paycheck. The money will burn a hole in your pocket or in your checking account if you keep it there for too long.

There are several ways to automate your savings. The majority of payroll systems, for instance, can divide your payment to go into two bank accounts. Alternately, you might set up automatic transfers from your checking account to your savings or brokerage accounts every payday.

IMPROVE YOUR CREDIT

Your credit is important if you plan to invest in real estate in the future. A lot.

First and foremost, make a commitment to paying every single bill you owe on time, every month, without fail. Your credit score is most significantly impacted by your payment history.

Open a few accounts after that to rebuild your credit history. Start with a secured credit card. You deposit money with them to serve as collateral, and they then offer you a card with the understanding that if you don’t make your payments as agreed, they would deduct the amount from your collateral. Assuming you make full and timely payments, they also submit your monthly payments to the credit bureaus, allowing you to rebuild your credit.

DON’T TAKE ON UNSECURED DEBT

Credit cards and other unsecured debts like personal loans will unquestionably make you poorer. Those new designer shoes and the lavish supper are not necessities. If you even remotely want to grow wealth, you need solid credit and a high savings rate.

While bad debt makes you poorer each month, good debt increases your wealth each month.

USE EXTREME CAUTION WHEN HANDLING SECURED DEBT.

Debts that are secured by property or vehicles can be advantageous but potentially risky. You have personal experience with bankruptcy, so you are aware of the dangers that debts might pose.

After filing for bankruptcy, you can obtain a mortgage. But not right away, and lenders will carefully examine your loan application.

You do not have the luxury of making decisions the way most people do, which is to let your subconscious and emotions influence your choice without your awareness and then use your conscious mind to twist reasoning to support your preferences. Cold, harsh logic must be applied from the very beginning.

Is it more affordable to rent or buy a home monthly in the neighborhood you want? What about once you factor in real estate taxes, homeowners insurance, and an additional 8% for upkeep and repairs?

For a while, think about renting. You have greater freedom with it, and the monthly housing cost is predictable; there are no “surprise” costs, like a $5,000 roof repair bill.

FINAL NOTE

You can start over and get a second chance through bankruptcy. Avoid wasting it.

The first time you make a mistake, learn from it. Learn everything you can about accumulating wealth, setting aside money for savings, and investing. Learn more about ideas like lifestyle planning and financial independence.