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Bankruptcy 101 – A Few Things You Need To Know Before Declaring

Bankruptcy 101 – A Few Things You Need To Know Before Declaring

Nearly everyone, at one time or another, has run into serious financial difficulty. There’s really no shame in that. It’s embarrassing when things turn so bad that we have to file for bankruptcy.

Since the most ancient times, people of all nationalities have undergone the very same financial problems we experience today. In the dim mists of the past, many money lenders sat on benches outside public buildings and plied their trade right there on the sidewalk, alongside barbers (who usually had dentistry or selling burial cover for cancer survivors as a sideline), and other small business people.

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The custom somehow developed that on those occasions where a money lender had made some bad loans and found himself no longer in a position to continue, he declared “bankruptcy”. The word bankrupt actually means broken bench. The former money lender would physically break his bench to indicate that he was no longer in business, thus declaring bankruptcy for all to see. There was no particular shame involved in those days and today, thousands of people all over the country “break their benches”.

This is a relatively simple procedure and normally an attorney handles everything. The moment the attorney takes your case, you may refer all calls from creditors to him or her and they are no longer permitted to harass you. The whole idea here is that when we get into honest difficulties and there is no other way out, we can wipe the slate clean and have a fresh start. For borrowers with federal student loans, Obama Student Loan Forgiveness program is a good route to go for as long as you are eligible, albeit we do not know if this program will continue on the next presidency’s term.

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That doesn’t mean you should deliberately go deeply into debt with the intention of slipping out from under it. The courts are pretty wise to all the dodges people have tried, so that sort of behavior could only denigrate your situation. Bankruptcy is for honest consumers who find themselves in serious difficulty.

While it takes 10 years to have the bankruptcy removed from your credit record, you may still be able to begin the process of rebuilding your credit. This can take time, but with care and perseverance, you can do a great deal to improve your credit score.

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These days, credit reporting institutions keep a record of everyone’s credit record. While the three major companies don’t always completely agree, their scores are usually pretty consistent.

One thing you can do shortly after having gone bankrupt is obtain a credit card, such as Mastercard or Visa. Now this isn’t quite the same as a regular credit card because, in essence, you buy it. You open an account for a minimal amount of money, say $100. And the institution issues you a credit card. If you handle this card properly, part of the company’s service is to report this to Experian and the other companies that follow your progress. After some time has past and you stay with the program, they will issue you a line of credit slightly larger than the amount you have on deposit, and so on. No matter where you stand along the way, your goal should be never to use more than 30% of the limit on any one credit card.

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It’s not a good idea to attempt to have old credit records expunged from your file. The longer you’ve been using credit, the better. It is, of course, vital to pay each bill on time and at the same time, not spend too much time worrying about your credit report.

If you keep card balances on target, pay your bills promptly and make certain you don’t buy anything you can live without until next year, by the time the 10 years are up and the bankruptcy disappears from your recent credit history, you’ll be on your way to better future with good credit and a smile to prove it.

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Junie Rutkevich

Game Developer of iXL Digital

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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