The Top 3 Personal Financial Mistakes that Lead to Personal Bankruptcy
Mistakes That Could Result In Filing Personal Bankruptcy… Again
The end of your personal bankruptcy case may mean a fresh start for you financially. However, if you don’t want to end up back in the same situation, it is important to understand how you got there in the first place. Before you find yourself preparing for your second personal bankruptcy case, consider the following information.
According to the American Journal of Medicine, the majority of bankruptcy filers are middle-class Americans who are well-educated homeowners, seemingly capable of taking care of their own finances. However, there are three common mistakes many of these Americans make that put them in the express lane for personal bankruptcy.
Are You on the Road to Personal Bankruptcy?
- Credit Cards- When you first acquire credit cards, what do you tell yourself? If you are like most, you swear you will never use the cards for anything other than an emergency. After a little while, this sense of responsibility wears thin and you discover just how easy your credit cards are to use for common items like groceries, movie rentals, and the electric bill. The credit cards give you a sense of having more money than you actually do, so it is easy to keep spending with them. However, when the bills come in and you are up to your ears in debt, you may have to consider filing personal bankruptcy again. Going on a ‘cash only’ diet is one of the best ways to avoid personal bankruptcy. Save, save, save, and don’t spend what you don’t have.
- Emergency Fund- Individuals who do not take the time to make and maintain an emergency fund often find themselves forced into personal bankruptcy. Consider this: if you became unemployed tomorrow, how long would you be able to live comfortably while you were trying to find another job? Or what if you become sick and have to take a year off of work? If you don’t have an emergency fund, chances are you would not be able to last very long. The bills would start piling up, and with no way to pay them, you may resort to using credit cards. Without income though, you have no hope of paying even the minimum balance on the cards, and you would end up back in bankruptcy court, looking for yet another fresh start.
- Health Insurance- According to www.cnn.com, 62% of personal bankruptcy cases are caused by medical debt. It is one of the most common reasons for personal bankruptcy. And if you consider the cost of health care these days, this should not come as a surprise. Individuals who are not proactive enough to maintain a health insurance policy often find themselves facing medical bills totaling thousands of dollars when they become sick. Some might argue that they can not afford to pay a monthly health insurance premium, but the cost is well worth it if you consider the toll a lack of health insurance can make on your finances.
If you aren’t interested in filing personal bankruptcy for a second, or even third, time, consider making the necessary changes in your life. Avoid using your credit cards when you don’t have the cash to pay off the debt. Set up and maintain and emergency fund, just in case you lose your job or become ill. Purchase health insurance to avoid those hefty medical bills.
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