As an adult, you have to get familiar with how to make and manage money. While this might sound like a relatively easy process, it is anything but. The average American adult makes a lot of bad financial decisions. In some cases, these decisions lead to a person filing for bankruptcy. When used in the right situation, bankruptcy can help a person get out of an unstainable financial situation. The key to getting through a bankruptcy unscathed is by working with a legal professional.
For years, Marcus Gomez Law has helped a number of people navigate the difficult process of filing for bankruptcy. If your main goal is to avoid filing for bankruptcy, then educating yourself is imperative. The following are some common financial mistakes that can put you on the path to bankruptcy and why avoiding them is so important.
Spending Tax Withholdings Is a Bad Idea
Starting a small business is one of the best ways to take control of your financial destiny. While owning a small business comes with its perks, it is also very difficult. One of the main things you need to be concerned with as the owner of a small business is paying your taxes. Taking money out of your annual tax withholdings can put you in a financial bind later on.
While you will be able to get a temporary injection of cash flow with these withholdings, it isn’t worth the long-term headaches spending this money can cause. Not only will spending these withholdings put you in the red with the IRS< it can also leave you with an unrealistic view of how well your business is actually doing. Living below your means is vital when trying to stay financially sound.
Don’t Take On The Financial Problems Of Friends or Family Members
Nearly 2% of the households in the United States file for bankruptcy annually. Some people think that personal financial problems are solely to blame for these bankruptcy filings. In reality, many of the people who find themselves in financial trouble experience problems after helping a friend or family member with their financial problems. Co-signing a loan may seem like a good idea, but this decision can actually come back to haunt you in the future.
If the person you co-sign for defaults on the loan in question, it can decimate your credit score. This is why you need to avoid putting your livelihood on the line to help the people around you. While saying no to friends and family members in need might be hard, it is the only way to avoid taking on someone else’s financial problems.
Be Mindful of How Much Debt You Take On
Overwhelming debt is usually the main reason why people file for bankruptcy. When in pursuit of essential possessions like a home or car, most people are willing to take on debt. Taking on a house or car payment you can legitimately afford is a horrible financial decision that can result in bankruptcy.
Are you attempting to prepare for an upcoming bankruptcy? If so, we can help you out.