Bankruptcy is often caused by singular events that are unexpected, like the loss of a job or sudden high medical bills with no insurance. However, it can also be caused by bad financial habits that dig a hole over time.
One issue, experts warn, can be using electronic payment options and setting bills up to pay automatically. If you don’t have money in the account when the debit hits, you’re looking at fines and fees that may have been avoided. It seems like it’s making life easier, but you are giving the system control of your money.
Perhaps the worst habit, though, is simply never making a budget. If you don’t know exactly how much you have to spend, it’s very easy to accidentally spend more than you think you are. When you don’t realize it until the end of the month and you can’t pay off your credit card, you’re in trouble.
It’s also risky to live without any sort of fund for emergencies. This can include things like the car breaking down or the furnace going out in the winter. These are repairs you have to make, and having no fund means you’re in debt.
Finally, it’s a risk to co-sign a loan with someone else. You may just think you’re doing that person a favor, but, if he or she defaults on the loan, you’re now on the hook for it.
In most cases, just one of these issues won’t lead to bankruptcy alone, but they can all lead to mounting debt and start you down the path toward serious financial trouble. If things get so bad that you’re running out of options, make sure you know how bankruptcy works and how it can help.
Source: Bankrate, “10 bad money habits that lead to debt disaster,” Dana Dratch, accessed Nov. 16, 2016