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Bankruptcy topics: Sometimes it pays to be pessimistic

Most New Year's resolutions focus on the power of positive thinking: Believe you can lose weight, get your finances in order and improve your relationships! Although optimistic thinking is beneficial in some contexts, a surprising number of financial experts actually say that pessimism can pay in bankruptcy proceedings and other financial processes. If you lower your expectations for your own financial success, you may ultimately be happier and more prosperous.

Many Washington, D.C., residents may believe that they will be flush with cash forever. If you have enjoyed the benefits of a steady job and continually increasing salary, you could accumulate a significant amount of debt simply because you feel more complacent. Imagine the implications of a job loss after this period of stability, however. Many individuals must pursue personal bankruptcy and credit repair because they did not plan ahead through savings. Planning for the worst-case scenario is always a smart choice.

Keeping with that pessimistic mentality, it is always wise to put aside at least three to six months' worth of savings. Experts say to prioritize this savings plan over a debt repayment effort. Paying off credit cards is a smart decision, but not at the expense of your financial health through savings. If your emergency fund is on the low side, realize that it might take you longer to pay off your debts. Further, if you are working to pay off a credit card before a promotional interest rate expires, approach your situation with pessimism; assume that you won't be able to pay off the balance, and come up with a backup plan in case of emergency.

Pessimism may not always seem like the smartest perspective, but it pays to be cautious when considering your finances. If you feel overwhelmed by debt, however, you may actually gain some optimism by learning more about bankruptcy options. Those processes may help you get your financial future back on track for a more realistic and responsible future.

Source: Fox Business, "The Financial Power of Negative Thinking" Tamara E. Holmes, Jan. 09, 2014

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