Mistakes that Lead to Personal Bankruptcy
We've all made financial mistakes in life - but for some individuals, those mistakes can have a debilitating impact on their way of life. Whether they didn't have an emergency fund to cover an unexpected medical bill, or they just couldn't get a handle on their credit card usage, these mistakes often lead to personal bankruptcy.
While personal bankruptcy is a useful tool for those strapped with massive debt burdens, more people should be aware of the worst financial mistakes that lead to personal bankruptcy.
Let's take a look at some of these common yet financially deadly mistakes, and how you can avoid making them:
Jumping into Home-ownership
Homeownership is a wonderful experience. Despite the rocky years of the Great Recession, owning a home is still one of the best assets you'll ever have. Additionally, the sentimental value associated with owning a home is priceless, after all it has been the American dream since the start of our country.
However, that doesn't mean that homeownership is all sunshine, particularly when it comes to your finances. Many people jump straight into buying a home, using up all their funds for the down payment and do not realize there are plenty of "small" costs to homeownership that will add up very quickly. From closing costs and property taxes to repairs and maintenance, homeownership can quickly overwhelm those individuals who haven't taken a look at the big picture.
Let's not even get started on the people who knowingly bought more home than they can afford because the banks were willing to finance them.
Not Having an Emergency Fund
What do you picture when you imagine personal bankruptcy? Do you imagine someone standing in front of the bankruptcy courts, looking sheepish as they admit to wracking up tons of debt on their credit cards in pursuit of the "better life"?
Well, it's time to wipe that image out of your head. Statistics indicate that more than half of all personal bankruptcies are caused by medical bills (in fact, that number is closer to 60%). Whether these people didn't have health insurance or just had ridiculously high co-pays, the point is that having an emergency fund of cash can often determine whether you can pay the bill or should declare personal bankruptcy.
Start building up an emergency fund, look into affordable health insurance if you don't have it, and learn more about what your health insurance really offers should you get sick.