There is almost one-fourth of the population worldwide that ended up filing for bankruptcy each year. You might ask; why?
Why Do People Go Bankrupt?
Here are some of the leading reasons why people go bankrupt these days.
Loss of Jobs
The loss of a job can very likely lead to bankruptcy. If you have failed drastically to have an emergency fund to cover all of your living expenses for the next 6-12 months, chances are you will surely end up bankrupt. You may be unable to prevent your possibility of losing a job, however, there are some things you can do to fight it. For instance, you should be an indispensable worker with a good working attitude so the company will choose to retain you. Also, you can study and obtain certifications to make yourself eligible for other jobs. A recent study by Credit Solvers shows that almost 50% of all credit impairment scenarios which can lead to bankruptcy start from the loss of employment.
Another culprit is when people get reduced income. One may not entirely lose a job, however, if your hours are say reduced to up to 50% or when you are moved to a job that pays less, you will surely find it hard to make ends meet on a day to day basis. It is a sad development that is unavoidable, but you have to brace for it like you would as you lost a high paying job. You can look for more work or side gigs that you can take on. You can work freelance online, be a driver in a ride-sharing app, or sell stuff on eBay.
Debts, Credit Cards
Debts can be very dangerous. It can easily snowball and grow out of control. If you have debts or a bad credit card that is charging as much as 30% percent high, then you are in for a big problem ahead. It can be tempting to pay just the minimum but, you just prolong your debt and it will cost you more in the long term with so many interests you have to pay. Your solution? Pay off your credit cards and don’t let your debt accumulate. Pay all of your bills on time.
Unexpected Medical Expenses
It can be hard to say goodbye with a racking up debt, especially credit card debt, especially when you are faced with huge medical bills to pay. The sad thing is you can’t pay them off immediately. Medical treatments are most likely mandatory, and health care insurance is rather expensive. Hence, it is no wonder that medical expenses particularly, unexpected ones are deemed the leading causes of bankruptcy to date.
A legal proceeding that can cause a lot of headaches and issues with your marital properties, personal assets, and whatnots. Many people who have gone through very messy marriages and got divorced can attest to this as the leading cause for their miseries, at least financially.
These top causes for bankruptcy, are not the only ones. There are more such as student loan debts, emergency expenses, lavish lifestyle, spending beyond your means, high utility bills, and more. Bankruptcy bears a negative connotation, but if you use it to improve your financial health, you can leverage it.