Sophie Kinsella has written this article and she is a financial writer who excels in financial topics like debt, credit cards, bankruptcy and many more. Some topics covered by her are the different types of bankruptcies, the pros and cons of filing bankruptcy and many more.
Detroit's bankruptcy is certainly a sad chapter in the storied history of the city and also a warning sign for the government entities across the United States of America.
Not only should the governments of different countries, the enterpreneurs and the small business owners should also use it as a teachable moment for learning how to avoid similar problems. It was earlier in this Summer that Detrot's Emergency Financial Manager filed a Chapter 9 bankruptcy petition for the city's proceedings. With more than a staggering $18 billion in debt, Detroit is in the news for becoming the largest municipality to ever file for Chapter 9 bankruptcy protection. This drastic decision has affected tens and thousands of people with benefits and pensions as well as the creditors. Apart from witnessing this dramatic decision of this city to file Chapter 9 bankruptcy, let's take a look into the matter. Let's check out the lessons that we should learn from this historic event.
- No matter how bad your situation is, there's always a reboot button: Irrespective of your present situation, there is always an alternative way to change your course. Although the prospective light at the end of the tunnel might be dim but it's still there. You may need some extent of creativity, but digging in right there is certainly worth it. So, if Detroit has hit that reboot button, so can you. Don't lose hope as there is always a way when there is will.
- Before it gets too late and things get worse, take immediate actions: Ross Perot had cleverly commented that when you see a snake, you should immediately kill it rather than appointing a committee on snakes. It was only the negligence of Detroit in dealing with the smaller problems that made them loom large and soar out of control. Financial issues are similar to cancer cells, which when ignored, can spread on to other realms. Hence, when you find yourself infected, do something to siphon off the issues without hesitating.
- Being the dark horse sometimes pays off: You will see that when you stick a finger in the eye of conventional wisdom and tradition, this can certainly pay off in the near future. In order to push oneself towards a new future, Detroit is encompassing this same thought for carving its own path. You have to move up from where you are as there are many people who are striving hard to make their city a “home” to live in. The startups, coffee shops and watch boutiques and there are different types of landmarks which have cropped up. Hence, this proves that by developing the persistence and buoyancy can gradually help you conquer all the overwhelming challenges.
- Good things happening today doesn't guarantee the future: As stated by John Stossel in Facebook, when he was 3 years old in the year 1950, Detroit was the richest city in America and now things have changed and have made it the biggest city to declare Chapter 9 bankruptcy. Cities like Detroit were flourishing when the economy was in a good condition but as they misused their money, didn't plan their public finances ahead of time, they're deep into those fiscal holes. America is full of such companies who kissed success too fast, expanded too fast, hit rough times and then finally skid off the shore.
- Cut costs and cut them as much as possible: This last point must be too obvious and has been already covered by some of the earlier points but still this is extremely vital. Detroit promised too much money to its employees, spent money recklessly and now it has paved its way to financial crisis. Detroit has also learned that raising taxes can play a role in making matters worse. You should also remember that the tax base for your business won't always remain the same and hence you just have to snap your fingers to raise more income like the city raises its taxes.
It's rather a matter of doubt that the politicians in Detroit will learn anything from the downfall of the city. But if you're smarter enough, apply the simple lessons in your daily life or in your business firm to aver the risk of a surrendering your finances before the court
