The US is the land of dreams and opportunities. However, it’s also the land of rising debt and bankruptcies. It’s a serious problem among Americans. Without a natural solution to deal with the debt, the responsibility goes towards its citizens and changing their lifestyle.
About 600,000 Americans declare bankruptcy every year. It’s one of the highest rates of bankruptcy per person globally. So dealing with this is a serious concern because everyone is vulnerable to it.
Bankruptcies aren’t limited to those part of the low socioeconomic bracket. Many wealthy Americans can also go bankrupt in just a few weeks due to mismanagement of cash flow and investments. So every American is vulnerable to bankruptcy. That’s why you must know the main reasons why it happens and how you can deal with it in the future.
The leading cause of bankruptcy is medical bills. About half of the American population is now bankrupt due to unpaid medical bills, with debts gaining an average of $1,000 per person. This is a particularly huge debt and one that can accumulate throughout the years. The main reason medical bills tend to pile up in the US is the lack of universal healthcare and a tremendous amount of administrative fees.
Congress has been divided whether if the US requires universal healthcare. Arguably, the privatized health insurance sector can give every US citizen the backing they need for healthcare needs. However, Americans’ insurmountable debts due to medical bills disprove this. In addition, the administrative fees and ride-on that come alongside health insurance in the US aren’t helping either.
How to Avoid It: The health insurance from your job can cover the simplest medical operations, but it’s not enough to cover bed rest and other fees from the hospital. Moreover, the maintenance medication you’ll need will also pile up your debts.
Increasing your coverage isn’t smart, either, since you’ll be paying more bills, which will put you more likely in debt. The American healthcare system is a scam is an understatement, and the best way for you to avoid bankruptcy from medical bills is to stay healthy.
Your lifestyle will determine your health. This is an argument stated by many healthcare professionals. Healthier lives can lead to less use of healthcare systems, which means fewer expenses.
The US has one of the highest divorce rates in the world. Although it has decreased throughout the years, the numbers are still quite high, and the costs are even higher.
The average cost of a divorce is around $12,000, and with child dispute costs, it’s around $15,000. Considering that Americans get divorced more than once, these costs also accumulate over time. This is just the average cost. Some estimations can go above $30,000, with celebrity and athlete divorces reaching over a million dollars.
How to Avoid It: Consider marriage as a business partnership and an investment. If you don’t think your investment will be worth it in five years, don’t get married. Arguably, you can always get a good marriage counselor. Counselors can decrease the chances of divorce by half. Thankfully, some states cover some of the cost of these counselors, so make sure to avail for those.
Use of Credit Cards
About 70% of the American population have credit cards, and they are not afraid to use them. The average credit card debt in the country is around $5,000. It had reached record lows when millennials had the highest spending power. However, it’s still pretty high when compared to other countries. Credit cards are a serious problem in American society. When mixed with a materialistic lifestyle, you have a recipe for disaster.
How to Avoid It: We need a credit score to purchase the most expensive but essential things in life, such as a home or a car. So we need to get a credit card at some point in our lives unless we want to buy these things with cash.
The solution is to use our credit cards efficiently and only use what we have in cash. Never go above that limit. If your credit card is above your salary, then you’re doing something wrong. When all else fails, consider hiring a financial advisor. They should get you on track.
Don’t be Afraid to Declare bankruptcy.
At some point, it’s better to declare bankruptcy than live these debts for your entire life. You certainly don’t want your children to pay for them. So declaring bankruptcy might be the better option. Your family can always recover from it if you don’t go back to the same cycle again. Remember, bankruptcy is avoidable if you’re only willing to change some things about your lifestyle.