Debt Free

Unfortunately, you can get yourself into a situation where you're deeply in debt even though you didn't intend to spend a cent. Most of these situations can be avoided, either totally or substantially, with just a little bit of foresight and planning. I'm not talking about criminal behavior, serious illness or job loss induced indebtedness either. What the heck am I talking about? Well, read on...

There are several things that the average person should seriously consider if they want to escape the clutches of deep debt caused by external forces.

1 – Check your car insurance – Make sure that your coverages are up to date and adequate to protect you in the event of an accident. With the price of cars and auto repair today, a seemingly minor collision can cost you thens of thousands of dollars. If you have the misfortune to collide with a car such as an Acura NSX or Audi A8, both of which have aluminum bodies requiring special repair techniques, a 15mph collision could wipe out the equity in your home.

The car repair induced bills you could be responsible for pale in comparison to the possible medical expenses you could be hit with. A collision victim requiring a week in the hospital, a surgery, a few specialists and some months of follow up therapy could easily wipe out $100,000 in coverage and then some. You know where the rest of those medical bills would come from. That's right, your kid's college fund, your 401K, or the equity in your home, if you're fortunate enough to have any.

The other insurance related mistake that can cost you plenty, although at a slower pace than inadequate coverage, is keeping your deductibles too low. For heaven's sake if you're the type to have $100 deductibles on your insurance policies, call your agent at once. You're throwing money away as we speak. Raise them to $500 or better. You don't want to claim anything that small anyway, it'll just cost you more when they raise your rates.

2 – Earthquake proof your house – You may or may not have earthquake insurance. In some locations it's much more expensive than others, as you'd expect. You should know, however, that most home owner's insurance policies won't cover earthquake damage, ditto for many when it comes to flood damage. You can, however, minimize the potential for your home to be substantially damaged in all but the largest earthquakes by following some simple steps. These include solidly bolting your house to it's foundation and strapping water heaters and other things so they are more or less immobile. Many new building codes require substantial metal strapping, shear walls, and metal brackets as earthquake mitigation measures, but older homes don't have such precautions in place.

Many home supply stores have classes on how to initiate these preventative measures. A few hundred or thousand dollars now could prevent tens or hundreds of thousands of dollars later. Many of the measures are fairly simple and can be completed by the average homeowner who's not deathly afraid of tools.

3 – Don't get behind on your taxes – Rule number one: Don't ever fuck with the IRS. Ever. The same holds true for your state's department of revenue. Their penalties and fees will eat you alive. It may seem you don't have the money to pay them. If that's the case you need to find a better accountant and/or re-prioritize your spending. Food and clothing can wait. If you owe the IRS substantial money, be proactive. Go see them, don't wait for them to come to you, because that's not a good day. Check into their Offer-In-Compromise program. This can allow you, in certain circumstances, to settle your tax debt for less than you currently owe. You'll need two IRS forms to initiate the process, forms 656 and 433-A (the IRS loves forms, don't they).

These are just some of the ways you can keep unexpected problems from overtaking you and plunging you deep into debt. The key is to keep informed. Like the law, ignorance is no excuse, although it sure is easier.