Bankruptcy and How to Avoid It

jacqui-gingrasThere is nothing that can be more financially troubling or emotionally taxing than going bankrupt. We all know someone or some organization that started off by doing well in the market but soon succumbed to their vices and went under. The news is littered with prominent people and organizations filing for bankruptcy almost every single day. This is because they spent more money than they had, didn’t stick to their financial plan, or didn’t have a good plan to begin with. Bankruptcy can be considered equivalent to death in the world of finances and should, thus, be avoided as much as it can.

This may be a little tough to wrap your head around, but know that all organizations that are doing poorly in today’s market only have themselves to blame. Granted that there can be some unforeseeable circumstances that can effectively cripple an organization, we feel if you keep a significant amount of money to deal with this proverbial rainy day, you can stop your business or organization from going under. Thus, the first lesson to avoid bankruptcy is saving when you are earning a lot in the market. We are not asking you to set aside everything you earn for the future, but you should save at least 10% of all of your revenue. If you do this, we feel that you and your organization will be well equipped to face unforeseeable situations.

Another good way to avoid bankruptcy is knowing the financial limits of your organization. If you know that your business is about to make a hefty profit from a deal in the future, refrain from spending this money until it is sitting comfortably in your bank. Remember the old English proverb, “Don’t count your chickens before they have hatched”? That principle applies to businesses and organizations as well. There is no justifiable reason for you to start spending from a revenue stream that hasn’t yielded its profits yet. Refrain from spending a fortune on things that you don’t need.

The last thing that we always recommend people or businesses to do when they feel like they are about to go bankrupt is to come up with a financial plan (budget) and stick to it no matter what. Even if you feel like you are getting a bargain at something, do not overspend. Respect your budget and make sure that everyone in your household or organization does too. The only way you can avoid going under is by sticking to your budget all the time. We know that this can get excruciatingly frustrating after a little while, which is why we advise all people to have a little portion of their budget assigned for miscellaneous items. If you feel like you are sticking to your budget a lot and it is restricting you, cheer yourself up by using a portion of your misc. items budget. Reward yourself sporadically and stick to your budget the rest of the time. We feel if you follow these tips and tricks, you can steer clear of bankruptcy and stay afloat.