Hard economic times are not limited to American families right now – many states, too, are finding themselves in precarious financial situations. California is notorious for its budget shortfalls, and, according to nbc.com, Illinois has joined the ranks of the nearly bankrupt.

Perhaps unsurprisingly, the problems plaguing state governments aren’t that different from the ones that cause financial distress at a more localized level. Here’s a look at how we as individuals can learn from the states’ mistakes.

• Don’t resist change. At the state level, it takes time and energy to alter policies that are draining finances without offering much benefit. For individuals, this often isn’t the case. So if you realize your debt is getting out of control, recognize that you’ll need to make concrete and permanent changes to improve your finances.
• Accept the hard truth. Many state politicians are unwilling to raise taxes or lower spending, because they’re worried they won’t get reelected if they do. Luckily, you aren’t up for reelection in your life. Increasing your income and/or reducing your spending are the only two ways of decreasing your current debt – if you’re unwilling or unable to do one, you must do the other.
• Look on the bright side. Federal bankruptcy law offers protection to individuals, organizations and even municipalities in financial difficulty, but that protection is not available to state governments. So, if you’re in way over your head financially, don’t panic: the U.S. Bankruptcy Code offers you a chance to start over financially, as long as you’re wiling to commit to improving your relationship with money, credit and debt.

The Good News

Serious debt can be an enormous burden, but, compared to state governments, individuals may actually have something to be happy about when they’re in serious debt:

• You don’t have to please millions of voters, so when you want to start saving money, you can cut back in areas that are less important to you.
• You don’t have to wait months or years of negotiating between Congress members to implement a new, financially streamlined lifestyle. Get started today!
• You can always move to a part of the country where the cost of living is lower as a long-term money-saver.
• Your family and friends may actually be in a financial situation to help you get back on your feet.

Additional Resources

Borrowing after Personal Bankruptcy (PDF)