How To Avoid Becoming a Statistic

by Emily · 6 comments

in Concepts in Frugality

Between March and June 2009, 381,000 people filed for some form of bankruptcy protection in the United States.  381,000.  Let that number sink in.  Over a third of a million people.  And that was a year ago, the last hard data I could find on the internet – where do you think we’re at now, number-wise?

You’re reading Almost Frugal, so forgive me for making some assumptions about you.  Are you the frugalite/frugalista looking for new ideas and a friendly community to share your victories and failures?  Or are you the flailing and sinking consumer reaching for a life preserver?

A few years ago, I was the desperate debtor, splashing around, looking frantically in the choppy waters around me for some help.  Somehow I stumbled across Kelly and have been following her since.  Unfortunately, the life preserver she and other frugal bloggers graciously threw wasn’t strong enough to prevent me from sinking. No fault of theirs, their life preservers just weren’t built for debt of my size.

But the US Government had the mother of all flotation devices for me!  Complete absolution of all my debts.  All for the low, low price of $1900.

That’s a story for another day.  Today I’d like to tell you how to NOT let your story become mine.

  1. Avoid debt completely.  Yes, completely.  No mortgage, no car payment, no credit card.  No cell phone or cable/satellite tv or anything else that comes with a contract.  Of course, be prepared to pay more for car insurance and have to put down a deposit for your utilities, and maybe miss that job you wanted so badly because they screen applicants by credit report.  But hey, small price to pay, right?
  2. Don’t ever get sick.  Catastrophic (and not-so-catastrophic) medical bills prompt 60% of bankruptcies.  So keep yourself healthy and pray none of those free radicals ever decide to mutate into something sinister.

Yes, that was a little sarcastic, but I hope you’re getting my point.  Even the most even, stable people can fall into the machine and be chewed up, through relatively no fault of their own.  One bad twist of DNA, one car accident, one layoff, we are all one something away from pulling the ripcord to our bankruptcy parachute.

But you can take steps to minimize your risks:

  1. Get rid of debt.  Now.  Seriously, right now – I’ll wait!
  2. Put together an emergency fund.  A few thousand dollars in the bank can make what would be a cliff to one person seem like hurtle to you.
  3. Get some life insurance, or reevaluate what type and how much life insurance you have.  Surely you don’t want your wife and kids going into poverty if you get in a serious accident and languish in the hospital a few weeks before expiring.

What are your thoughts on other ways to avoid bankruptcy?  What have I missed here?  Do you agree with me, or do you believe there are absolutely ways to annihilate the chance of having to file?  Please share…  🙂


1 Jersey Mom April 13, 2010

What a coincidence, I'm at a point where I'm contemplating on paying off the mortgage but wondering if I should or not with money in my investment acct. I'd like to have no debt (no mortgage) but don't want to have too little in savings either…
.-= Jersey Mom´s last blog ..A Disorder I Live With =-.

2 Tracy April 13, 2010

Compared with my friends I have very little debt. I have less than $8000 total in debt, not counting day to day expenses. I’m debating on paying off my car note (something I HATE having) with some investment money I have coming to me. And my student loans will be low enough by next tax season that we can pay them off then. I live by the moto, that if I can’t pay cash, I don’t need it. Except in rare instances, when a car just dies before its expiration date.

3 Abigail April 13, 2010

Unfortunately, I don’t think anyone can completely safeguard him/herself from bankruptcy. Not until a lot of changes go through the insurance system in this country.

Back in 1999, I was so severely ill that I spent 3 months in the hospital on life support. At the long-term care facility (2 months or so), I had two or three doctors. One of them sent us a bill for $70,000. That’s not the cost of feedings, room, medicine, occupational therapy, physical therapy, respiratory care. Just the doctor’s bill.

We were lucky; my parents had excellent insurance. Amazing really. But if the company had fought them on even one or two things, it would have been a financial disaster.

That said, I do think it’s incumbent on all of us to try and avoid debt as much as we can. With pretty much all the tools you mentioned. Beyond that, I think it’s down to luck, hope and determination.
.-= Abigail´s last blog ..Should I get AAA? =-.

4 Kathy April 13, 2010

I completely agree with what you’ve said, Emily. Your answers on how to completely avoid becoming a statistic had me laughing today. Thanks for that. 🙂

Your numbers on the percentage of bankruptcies caused by medical bills are accurate and should give anyone pause. The saddest thing is that many of those folks HAVE insurance!

It is so true that we are all but one misstep from disaster, even more now than ever before.

My ideas to add:

1: Never put more on your credit card than you know you can afford to pay off in full at the end of the month. Not always possible, but try to stick with it as much as possible.
2: Failing that, try to make more than the minimum payment due on your credit card bill. This will allow you to pay down your balance more quickly.
3: Before you buy something that would take you into debt, think about it. Is it something that can wait until you can save the money up to purchase it?
4: Avoid payday loans and other short term financing like the plague!

Thanks for the wonderful post.

5 Lisa April 14, 2010

The most important ways to avoid bankruptcy:
1. Live within your means, or better yet, slightly under them.
2. Pay yourself first. Each time you get paid, put a certain percentage into savings.
3. If you can’t refrain from using your credit card, then don’t keep it in your wallet. Put it where you keep your birth certificate and marriage license, so you can’t impulse shop. If that isn’t enough to control you, then cut the card up because you should have one.

I’ll be honest. I like to surround myself with pretty things. But I don’t *need* those pretty things, and if I don’t go shopping, I don’t know what I’m missing. So when I simply must go to the mall, I plan my route strategically, to get what I need and get out. I don’t stop to look, because if I do? I’m doomed. I think we all need to learn our weaknesses, and then figure out a way to avoid them like that, if we want to stay out of debt.

6 Corrie April 14, 2010

Beautifully written, loved it!

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