Most people who declare bankruptcy never want to go through that experience again. Unfortunately, unless you make major changes to your life and finances, you may end up in front of a bankruptcy judge again asking for relief a second or third time. In fact, about 8 percent of bankruptcy filers have gone through the process previously. Here are three changes you should make to help you avoid falling into another financial bind that may force you to declare bankruptcy again.
Get Health Insurance
At first glance, the advice to get health insurance to avoid bankruptcy may seem odd. However, medical debt is the number one cause of bankruptcy filings, accounting for 3 out every 5 cases. Medical emergencies requiring hospital stays and the onset of major diseases such as cancer can be exceedingly expensive to treat and can push people to their financial limit fairly quickly.
While health insurance is not a panacea—10 million people who have health insurance still have trouble paying medical bills—it can reduce some of the financial burden caused by medical issues. For instance, it costs anywhere from $400 to $1,200 for an ambulance ride to an area hospital. Most health insurance plans cover this cost. If you don't have insurance, though, you would pay out of pocket and one trip could wipe out your bank account, causing you to fall behind on other bills.
Another benefit to health insurance that can protect your financial future is many health insurance policies will pay for preventative care, which can keep minor health problems from becoming major headaches. For example, many health insurance plans cover adult vaccinations for several diseases such as hepatitis, human papillomavirus, and measles. Not only can these vaccinations prevent you from getting sick, they can protect vulnerable people in your life (e.g. children and elderly persons) from falling ill too and requiring you to pay to help them get better.
Studies upon studies have shown that people with higher education earn more money. For instance, according to the Bureau of Labor Statistics, people with a bachelor degree have median incomes of about $1,101 per week, while those with high school diplomas only earn about $668 per week. Unemployment rates also drop the higher up the educational ladder you go. The unemployment rate for people with bachelor's degrees was 3.5 percent, while the rate for people with master's degrees was 2.8 percent.
Like health insurance, getting a college degree or professional training is not a silver bullet. However, investing in your education can pay off in a higher paying job. Some degrees can be used to gain access to multiple industries or positions, which may make it easier for you to bounce back if you suffer a job loss.
Even if you're too broke to pay for a formal education, you can learn a variety of useful skills using the Internet and books. You can then use these skills to develop a side hustle that supplements your existing income. For instance, you could learn computer programming and earn extra cash as a freelancer.
Whichever educational path you decide to take, make sure it leads to improved income prospects that help you meet your financial obligations and goals so you don't end up falling into another debt trap that leads to a second visit to bankruptcy court.
The simplest but most powerful thing you can do to minimize your risk of filing bankruptcy again is build a nest egg, particularly if you're one of the 76 percent of Americans who live paycheck to paycheck. A lack of savings makes you more vulnerable to falling in debt when an emergency arises. Additionally, if your credit is poor, you may be forced to take on bad debt such as payday loans to help you weather the financial storm, which will only compound an already terrible situation.
Building savings may seem like an impossible task when all of your money is going towards your living expenses, but start small. Even setting aside $10 per week will net you $520 by the end of the year. If you get a tax refund every year, set aside some of that money in a rainy day fund.
There are also some states and organizations that have programs designed to help people save money. For example, in New York City, the government will deduct a minimum $200 from your tax return, match 50 cents per dollar (up to $500) the family contributes to the savings fund throughout the year, and place it all in a savings account. Look for similar programs in your area to help you create a decent nest egg that can help you with emergencies.
Avoiding bankruptcy will take some effort and a commitment to changing your financial life. For more tips on things you can do improve your finances or information about the bankruptcy process, connect with a bankruptcy attorney by visiting a site like http://www.morrisonmurfflaw.com.