Have you ever met someone who says they have never owned a credit card, never taken out loans and never spent more than they have? If they have never owed anyone money in their life, they have done well.
Yet, unless you have a particularly high income, or inherited wealth, never borrowing money can be almost impossible.
Most of us do, at least occasionally, spend on things we do not need. Yet, even with great restraint, life can throw events at us that leave us little choice than to take on debt.
Your mom falls ill and the insurance will not cover the vital treatment they need. Do you say sorry, Mother, time to call it a day? Of course not. If you can find a way to come up with the money, you’ll do it.
A tree damages the roof of your house and your insurance will not cover it. Do you accept you will have to bail out your child’s bedroom every time there is a rainstorm? Of course not. You take a loan to make the repair, figuring that it will pay for itself in the long run by preventing the house from losing value.
Major events that can throw you into debt, or require you to take on additional debt are not something you can plan for. What’s more, sometimes a sequence of them can occur in quick succession.
However hard you try to manage your finances with care and however diligent you are to repay your debts on time, it only takes one freak event to tip you over the edge. If that happens, it is essential to be realistic. Can you pay those debts back? Can you ever hope to pay those debts back? If the answer is no, you may need to find out more about bankruptcy.