In this post on avoiding bankruptcy, we will discuss the importance of managing your money by using only the cash you have.  Most people encounter increasing debt problem because they over-extend themselves with credit purchases (such as using the credit card, or buying that 50 inch flatscreen TV using home equity loan).  One of the best way to make sure that you never fall into bankruptcy is to discipline yourself to use cash (including debit card) for every expense.  If you can use cash for all your expenses, you can avoid accumulating excess debt and thus never have to worry about bankruptcy.

In order to use this tip to avoid any possibility of bankruptcy, put away all your credit cards and your lines of credit such as home equity loan.  Lock up your credit cards and access to lines of credit, or better yet, rip them up so you will never be tempted to use them.  The idea behind this tip is to spend only what you have.  If you are making $3,000 a month, then you can only spend $3,000.  If you don’t have credit cards or access to lines of credit, then you will not incur any debt that you will need to pay for in the future, hence no possibility of accumulating so much debt that you have to consider bankruptcy protection.

Image by v i p e z via Flickr

So if you are making $3,000 a month, and you are thinking of a buying a $1,000 flatscreen TV, you should review your budget (please refer to the previous tip on creating a budget) carefully.  You have to be realistic that you cannot buy this $1,000 TV now, because that would leave you only $2,000 for your other monthly expenses.  Try to cut your other monthly expenses just a little from each category, so you won’t feel too much effect from the cutback.  If you can reduce other expenses by $250 a month, then you have just found a way to pay for your TV in 4 months (4 months x $250 = $1,000).

By using cash for all your expenses, you are now able to live within your means and not incur any debt at any time.  This is the one of the best way to avoid bankruptcy.  If you use this tip in conjunction with a reasonable budget, you should never have any debt problem ever again.

Click here to read the next tip Avoid Bankruptcy Tip #3 – Negotiate With Your Creditors

Click here to read the previous tip Avoid Bankruptcy Tip #1 – Create a Budget

Tags: Avoid Bankruptcy, Live Within The Means, Use Cash To Avoid Bankruptcy

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Posted in Avoid Bankruptcy by ssanchez 1 Comment