Sometimes, problems can sneak up on us. An issue that seems small can develop into a big challenge- and create huge anxiety. One way to combat these problems is to have good awareness. Use these tips to raise your awareness about three issues that can lead to bankruptcy.
I recently had a parent (83 yrs. old) spend a week in the hospital. Now, having Mom or Dad in the hospital is stressful enough. But the additional concern of the hospital costs makes the situation worse. There is uncertainty over health and finances.
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Investopedia wrote a great piece about the main causes of bankruptcy. 62% of all personal bankruptcies involve medical bills. Here are some tips to prevent this issue from happening:
• Insurance: Carry insurance with reasonable deductible payments and co-pays. Keep in mind that high deductible plans will require a large amount of money out of pocket, if your have a major illness.
• Medicare supplemental insurance: If you’re on Medicare, carry supplemental insurance to cover as much of your medical care as possible.
This situation is probably the most difficult one to address. The loss of a job can happen quickly- and may be unexpected. The most immediate need is how much severance you receive- and how to finance your monthly expenses. Take these steps to help address this risk:
• Save for emergencies: The risk of job loss is a huge reason to set up a savings account. Create a monthly budget and cut some expenses. Use those extra dollars for savings. If a job loss occurs, you’ll have some financial cushion.
• Your resume, your network: Keep your resume updated with changes in your job skills, titles, and accomplishments. Make a note to review your resume every six months. Keep a document with the contact information for your network of peers. Make sure your LinkedIn profile is complete.
The second point will help you hit the ground running, if you need to interview.
Too much credit
Of the three reasons for bankruptcy in this article, this is the easiest one to address. Now, it is true that many people find the need to borrow more money because of the first two situations. You take out credit cards to pay medical bills- or to fund your monthly expenses after job loss. No doubt- that is a crisis many people face.
To the extent that you can, don’t let your lifestyle drive your decision to take on more credit card debt. As mentioned above, put a budget in writing. Find ways to contribute to a savings account- and do it every month.
If you have too much credit, try to stop using it. Cut that spending out of your budget. To really earn your “credit merit badge”, work to pay down your existing credit card debt quickly.
Plan as well as you can
No one can anticipate and plan for everything. However, take a hard look at these three reasons for bankruptcy. You can consider these as storm clouds on the horizon. Take some steps to plan for the storm before it gets here. If a crisis does occur, you’ll have more peace of mind.
Do you have a family member dealing with these issues? I’d love to hear from you.
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
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