Reckless financial habits can result in bankruptcy

As the New Year ushers in, many people on Long Island, New York are making a list of goals to accomplish and bad habits to eliminate. While more people are concerned about their career and health, they should also look into their financial wellness and think about bad money habits, which could result in bankruptcy.

One of the worst money mistakes is spending without a budget, which can result in a financial mess. It is not surprising that about 50 percent of the American population spends more than they earn. According to reports, this occurs because at least two-thirds of the population does not have a budget. Overspending can reduce the money allotted to other needs and can force the need for loans or credit card use to make ends meet.

Carrying a credit card balance is not a good practice because it accrues interest, penalties and other charges. Thirty-nine percent of individuals in the United States carry credit card debt. On average, most households carry almost $15,000 in debt. Paying down debt is more difficult once penalties and accumulated interests have accrued and it may be ideal to use a payment strategy.

One-third of Americans do not save for emergencies. Life is full of uncertainties that can have a substantial financial impact. Health issues and job loss can affect personal finances and without any savings, it could be difficult to pay expenses, utilities, mortgages or rent.

Finally, not all Americans are saving enough for retirement. Experts say that those in their 20s and 30s should put approximately 10 percent of their annual salary into a retirement account and that number should double in their 40s and 50s. However, the average American only saves six percent of their salary for a retirement plan.

It is difficult to tackle financial challenges without knowing the right debt-relief option. Filing for bankruptcy may seem embarrassing and have negative effects on a person’s credit score; however, doing so can provide protection from creditors and eliminate debts. Consult a legal professional for advice on whether bankruptcy is the right course for you.

Source: CBS 5 News Channel, “4 Bad Money Habits to Break in 2014,” Andrew Housser, Dec. 16, 2013