Man thinking about expenses

Escape the Debt Trap and Bankruptcy in 3 Smart Moves

Almost a million people file for bankruptcy protection each year to escape their creditors and get by in life. Improving your money management skills can help you avoid the debt trap that could ruin your life.

Money management skills remain among the hardest skills to master for the average American, notes a Chapter 7 bankruptcy lawyer in Salt Lake City. Close to a million people file for bankruptcy every year, giving insights into the extent of the problem. Recent reports indicate that senior citizens are increasingly filing for bankruptcy just to get by and seek protection from their creditors.

Increasing costs of living only serve to complicate the money management problem, as it leads people to take on more debt than they can handle. To escape this trap, you need to take a few proactive measures.

1. Increase your income

If you’re struggling to pay your bills using your salary, then it’s time to rethink your income opportunity. Your current salary is not enough to support you, so you need to increase your income. Consider taking on an extra shift or a second job, anything to put an extra dollar in your pocket. Any extra money keeps you from taking on expensive credit card debts that come with interest rates as high as 20 percent.

With a little effort, you can learn new skills and take advantage of the gig economy and freelance movement to grow your income. Thanks to the internet, you can learn and polish just about any marketable skill you need to improve your life. The internet is rife with success stories of people who overcame poverty using self-taught skills.

2. Create an emergency fund

Man holding money

Emergencies can strike any time without a warning. The transmission in your car might fail, your house might need a new roof, or you might have a medical emergency. Without a cash reserve, you might have a hard time solving these problems and your life might suffer as a result. Experts recommend having an emergency fund that can support you for at least three months.

If you’re a single-income family, you might want to kick it up to six months. Without a buffer, any financial hitch could lead you to take on massive debts to deal with the pressing situation. For instance, you could lose your job if your car breaks down and you need it for work. An emergency fund lets you find a solution quickly without taking on additional debt.

3. Set a budget

This advice might sound quite cliché, as every financial expert highlights the importance of setting and sticking to a budget. Experts continue to emphasize the need to budget your money because it’s good advice. To get a handle on your finances, you need to track your income and expenses. Additionally, itemizing your expenditure offers excellent insights into your financial habits. That way, you can eliminate unnecessary items to keep your costs low and save some of your income.

Many people fill for bankruptcy protection when their massive debts threaten to overrun or ruin their lives. Despite the spiking cost of living, you can get a handle on your finances and escape the debt trap. Your ability to achieve this feat hinge on polishing and improving your financial management skills.