Bankruptcy is often the last resort for those in financial difficulty, but it’s never a good place to be. The good news is there are lots of things you can do to reduce the risk of going bankrupt. Whether you’re beginning to struggle financially or simply want more money to play with, here are five useful tips for avoiding bankruptcy.
- Budget Properly
This is something you should always do whether or not you’re in financial difficulties. Be organised and pay off any debts as quickly as possible. Do your accounts every month, and know exactly how much money you’re going to have and what you’ll be spending it on. Stick to your plans as far as you can and if possible build up a reserve. If you’ve got a mortgage, it’s good practice to have sufficient savings to cover three months of repayments in an emergency. If this isn’t possible, at least be clear on what’s coming in and going out at all times.
- Never Hide from the Truth
If things are getting worse, never ignore the problem, as this will only make matters worse. Don’t leave post unopened or ignore communications. There’s a great temptation to hide your head and hope it’ll all go away. Never do this. When things get difficult, seek help immediately. That way you’ll find options for reducing the problems that you may not have considered, and it’ll help to avoid the worst outcome.
- Maximise Your Income
Look at ways of bringing in more money. If you’re an individual with a cash-flow problem consider getting extra work. Even if you have a day job, there are often opportunities for a few part-time hours in a bar or cleaning at other times. If you have your own business, think about whether there are any other services you can offer to get you through the difficult patch. There’s no point trying to remain true to what you do when you need money. It doesn’t matter where it comes from.
- Cut Unnecessary Expenditure
Some things cost a lot more than you think when you see them on paper. Among the most common offenders are satellite television, holidays, subscriptions and cigarettes. These can take a high percentage of your monthly income, and when times are difficult they’re all things that, at a push, you can probably do without. If you’re running into debt, these are the things you should consider canceling. Focus your resources on the essentials.
- Know Your Assets and Liabilities
Divide everything you have into assets and liabilities. Assets are things that make you money such as the tools and clothes you use for work, the car that gets you there, savings accounts and similar. Liabilities lose you money whether they’re things you’ve bought that you don’t really need or things you have to spend money on to keep, such as subscription packages or club memberships. The game is to own as many assets as you can, whilst getting rid of liabilities wherever possible. So buy the former and sell the latter.
If you’re struggling financially and want advice on avoiding bankruptcy, contact Irwin Insolvency for friendly, professional advice from our empathetic team.