Secrets to Avoid Bankruptcy

Bankruptcy

Unlimited activity, of whatever kind, must end in bankruptcy.

Johann Wolfgang von Goethe

According to figures released by the Malaysian government, from 2005 until June this year the following categories were the top cases in the number of people declared bankruptcy 

   Unable to settle car loan 15176 cases (23.69%)

Unable to settle commercial loan 6949 cases (10.85%) 

 As guarantor 6244 cases (9.75%) 

Unable to settle personal loan 6129 cases (9.57%) 

Unable to settle credit card debts 3767 cases (5.88%)

Owning to income tax 660 cases (1.03%) 

Housing loan default 214 cases (0.33%)

Educational loan 138 cases (0.22%) 

 Out of the 8 categories, 6 categories were relating to people who were unable to manage their personal finance. How do you look after your own money to avoid being declared bankrupt? 

 1. Live within your means: Before you decide to obtain a car loan or a personal loan you must factor in the amount payable each month within your monthly budget. When you work out the sum and you find that your outflow (household expenses, car loan or personal loan repayment, and all other commitments) is more than your inflow (your earnings) you are not in a position to raise the loan. Avoid the temptation and forget about getting a new car or getting a personal loan to beautify your house. 

 2. Credit card: Credit card is not a source for getting credit. It is only a convenient way to make payments. You still have to earmark and set aside a sum to meet the payment that you have charged to your credit cards. Again, the amount that you are about to charge has to be included in your monthly budget. If it is out of your monthly budget don’t use the card and restrain yourself from getting materialistic. Another point is that it is wise to settle the amount fully when you receive the monthly statement from the bank. If you don’t and you allow the amount to snowball, bankruptcy is the outcome as confirmed by the number of cases stated above. 

 3. Self-discipline: Don’t keep up with the Joneses. Do not attach yourself to material things. Enjoy what you have and be happy. Keep your reputation clean because people remember you more as bankrupt than an ordinary citizen. 

 A debt-free life is a carefree life. You go to sleep soundly every night knowing fully well that nobody is going after you for money.