By Attorney Stephen Elias
These 9 rules, suggested by people who have been through bankruptcy, will help you stay out of financial trouble.
1. Create a realistic budget and stick to it.
2. Don’t buy on impulse. When you see something you hadn’t planned to purchase, go home and think it over. It’s unlikely you’ll decide to return to the store and buy it.
3. Avoid sales. Buying a $500 itemon sale for $400 isn’t a $100 savings if you didin’t need the item in the first place.
4. Get medical insurance. Because you can’t avoid medical emergencies, living without medical insurance is an invitation to financial ruin.
5. Charge items only if you could pay for them now. Don’t charge based on furture income; sometimes future income doesn’t materialize.
6. Avoid large house payments. Obligate yourself only for what you can now afford and increase your mortgage payments only as your income increases. Again, don’t obligate yourself based on future income that you might not have.
7. Think long and hard before agreeing to cosign or guarantee a loan for someone. Your signature obligates you as if you were the primary borrower. You can’t be sure that the other person will pay.
8. Avoid joint obligations with people who have questionable spending habits – even your spouse or significant other. If you incur a joint debt, you’re probably liable for it all if the other person defaults.
9. Avoid high-risk investments, such as speculative real estate, penny stocks, and junk bonds.Invest conservatively in things such as certificates of deposit, money market funds, and government bonds. And never invest more than you can afford to lose.
Excerpted from How to File for Chapter 7 Bankruptcy, by Attorney Stephen Elias, Albin Renauer, J.D., & Robin Leonard, J.D. (Nolo).