When it comes down to it no one really wants to live on a budget. The first thing a bankruptcy attorney will tell someone that comes into their office and is on the cusp of filing bankruptcy but trying to avoid it, try living on a budget for a year and see if you can avoid bankruptcy altogether. Over the last 20 years Americans have learned to live way beyond their means using credit as a way of firing up the printing press when they get short on cash. Before filing bankruptcy, everyone should take a hard look at their spending habits and eliminate everything that is not completely necessary. We as Americans have blurred the line between wants and necessities. So many people think they need a luxury automobile as it's part of their image, when in reality all they need is transportation. So many times people put themselves in financial despair over items they believe they need and really don't. It doesn't mean you have to be a spendthrift to avoid a bankruptcy filing, but if you can't put away any extra money out of your paycheck because everything is going to what you "need" there is something wrong.
The three main causes that forces an individual into filing bankruptcy are, the loss of a job, an illness that runs up a large amount of medical bills, and a family breakup that causes divorce. Many of these things will not lead to bankruptcy filing if a person was not living beyond their means. However, if disaster strikes and an individual has no cushion, things get out of control quickly ending up in bankruptcy.
I know trying to live on a budget is about as much fun as having a colonoscopy. And for most of us it is the last thing you want to do. Living on a budget has many benefits with the goal being to increase your net worth to a place where life's small disasters won't destroy the family finances. When you budget you need to take in consideration all the necessities first including a mortgage or rent, transportation costs, utilities, medical costs and putting something away for the future like a 401(k). The first thing a person needs to get rid of is all their unsecured debt like credit cards. Credit card debt can destroy a person's budgeting because it's too easy to overspend. When using credit cards a person should try to pay it off at the end of the month and not carry the balance over.
Living on a cost-effective budget is not rocket science and it's pretty easy to turn around. Some people will need to file for bankruptcy because there's no way they will ever be able to pay the debt that they have accumulated. The basic idea behind budgeting is a person needs to spend less than they are making. By spending less than you're taking in should be able to avoid filing bankruptcy and start building a nest egg. For those that are too far upside down, they should consider speaking with a bankruptcy attorney about filing Chapter 7 bankruptcy.
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