Everyone experiences financial difficulties at some point in their lives. Currently in 2010, as a result of the global economic decline, more people than usual are struggling financially. In many cases, the bad economy has hit even financially stable people very hard, and thousands of people who were presumably doing just fine are now in such dire financial straits that declaring bankruptcy is their only option.
How can you avoid having this happen to you?
Currently, I believe the key to financial stability is to proceed with caution and expose oneself to only limited, well-managed, and well-evaluated financial risk. Caution should be the order of the day.
Regardless of whether the economy is strong or weak, there are fundamental principles of common sense that should always be adhered to so that you never find yourself out of control financially and declaring bankruptcy. You should apply these principles even more rigorously than you would have five years ago, given the current economic climate.
Regardless of your credit-accessibility, you should never exceed your own comfortable affordability level. Credit that cannot be repaid is the adversary!
Recognize that a prudent borrowing strategy can be an integral part of the larger picture. However, never purchase liabilities with borrowed funds. Throw away your credit cards and repay any loans you may have taken out to purchase depreciating assets. Consumer products typically do not appreciate in value, so you can never recoup your investment. This includes automobiles!
Do not confuse the distinction between an asset and a liability. Some individuals mistakenly believe that a motor vehicle is an asset, despite the fact that it loses value from the moment it leaves the dealership until it is scrapped.
Learn about the effect of compounding on interest payments. If you are intelligent, you can apply the principles of compounding very effectively. Similarly, if you do not employ common sense, you can spiral out of control into deep debt due to the exact same compound interest principle.
When obtaining money secured by collateral (such as mortgage bonds), exercise extreme caution. You must be certain that you have BOTH a long-term AND a short-term strategy for servicing your debt. If you do not proceed with caution, you may incur unmanageable debt and lose your collateral (often your property) in the process.
Leave sufficient liquid cash on hand to cover your basic requirements and weather a financial crisis for at least six months (and in the current economic climate, even up to nine months). I realize this is a difficult order, but if you complete it, you will be eternally grateful. It provides you sufficient time to devise a drastic and immediate plan if you find yourself unable to pay your debts due to a lack of income.
I understand that these bankruptcy avoidance principles sound rather conservative and dull, but if you start modest and work diligently, achieving this level of financial security will not be difficult at all. Do not anticipate achieving stability immediately; rather, begin applying the principles gradually. Eliminate debts gradually. Stop using credit whenever possible. Downsize. Live somewhat. Do not become a financial slave. Avoid declaring personal bankruptcy!
Best of Luck!""
" - https://www.affordablecebu.com/