Tips to Avoid Bankruptcy

Discover how to avoid bankruptcy with these simple lifelong habits, which if you follow diligently, will make sure you have financial security during the course of your life. Unsurprisingly these hints to avoid bankruptcy are actually quite straightforward and if you think about it, are actually quite obvious.

You most likely know this but remember that prevention is always better than cure. In the current economic climate, no matter how stable you think you are, you need to take cognisance of these pointers, otherwise you might not be ready when the unexpected arises. There's no such thing as being too prepared when it comes to taking care of your assets.

#5 Never live beyond your means. This doesn't mean you can't take out loans. But never buy goods that devalue with money you have borrowed. So cut up all those credit cards and settle any debt that you may have taken out for consumer goods. Remember that most consumable items never appreciate in value. You will always lose money if you had to sell them again.This is why it is unwise to buy them on credit.

#4 Don't mix up an asset with a liability. You may believe a vehicle such as a car is an asset, when it is actually a liability, since it depreciates in value over a period of time.

#3 Understand compound interest and how it can work either for you or against you.

#2 Borrowing money to buy something is called gearing. Make sure you know what you are doing. It is a useful strategy, but if used indiscriminately, can sink you financially.

and the #1 tip:

Leave enough cash buffer to survive (about 6 months worth). I know this is a tall order, but you will be grateful of this advice someday!

If you follow these rules, in fact you probably won't ever even need to think about ways to avoid bankruptcy during the course of your life, because these habits will be so firmly established that you will never find yourself in a position of financial difficulty.