It was not too many years ago that the dominant narrative about those who declared bankruptcy was that they ended up in dire financial straits by their own hand, like overextending themselves in the realm of consumer credit; buying big-screen TVs, spending lavishly on vacations they could not truly afford, and then eventually suffering from what is still regarded by many as the personal financial death penalty.
One of the few silver linings to the financial crisis of 2008 is that because so many earnest Americans found themselves going through foreclosure, bankruptcy, and otherwise mired in a financial hell of one sort or another, perceptions about just what a “typical” bankrupt looks like thankfully began to change.
Well, an article appearing over at The Motley Fool details just what the number one reason is as for why people claim bankruptcy, and, sure enough, it has nothing to do with spending what you don’t really have on things you don’t really need.
The real culprit is medical debt.
The article cites data from the Kaiser Family Foundation that reveals over 25 percent of adults in the United States fight to keep up with medical bills, and that medical expenses are, indeed, the primary reason for personal bankruptcy filings in the U.S.
Additional information from The New York Times indicates that even insured adults are under the gun from medical expenses. Last year, the Times reported that a full 20 percent of insured American adults under the age of 65 had difficulty paying medical bills.
The good news, then, is that we’re not really a nation of careless spenders – many of us are doing the best we can with what we have. The bad news is that there is no easy answer to the problem…because the solution, when it comes right down to it, is, simply, to have more money.
No problem, right?
Getting more specific, the root of the problem (outside of the cost of medical care) appears to be the horrendous savings rate that characterizes much of America. Few people nowadays have anything socked away to cover sudden, unanticipated expenses, and now, with the cost of health care at astronomical levels and insurance doing such a so-so job (at best) of covering those costs, even a trip to the doctor for the annual checkup, with all of the lab work that accompanies it, carries with it the same financial impact as the transmission all of a sudden up and dying.
There is no easy answer; there is only one answer – get more money. If you don’t yet have a side hustle…that “gig” at which you plug away, in addition to your regular job, to help put more distance between you and financial uncertainty…then think seriously about getting one. It may not be easy to achieve wealth, but there’s usually no good reason to be broke, so if you are broke, or teetering on the edge of that condition, resolve that you’ll deal with it now, before you free-fall into the abyss.
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