Many people are the only earners for their families. When they are struck with a debilitating illness or injury, they are likely to fall victim to financial challenges because of the health care costs and possible loss of income. The cost of medication, therapy and treatment can chew up a family’s finances very quickly, squeezing out mortgage payments, food budgets and tuition payments. When the earner’s recovery is prolonged, medical bills can eat up a family’s short-term savings and put them under a mountain of debt.
To avoid this scenario, wage earners should heed a few simple tips. First, they should try to up their savings level, saving more than 10 percent of their income if they can. If that is not possible over the long term, they might try to increase their saving slowly for a few months or a year. Ideally, everyone should have at least six months of savings available for a long-term financial drought.
They might also defer taxes by contributing more to their 401K, IRA or Roth IRA. Lowering their investing fees can also put more money into savings. By keeping costs low now, they will have more later.
Sometimes, however-as the residents of Nassau, New York, and other parts of the country know-hard times can strike before a person is ready for them. In some cases, even the best of planning cannot prevent financial hardship, and, in fact, there are always some people who are facing financial challenges through no fault of their own.
In such cases, there is a legal option that can enable debtors to be rid of their debt and be protected from creditor harassment: bankruptcy. Businesses looking at hard times generally file for chapter 11, whereas individuals file for chapter 7. In either case, having the assistance of an experienced legal specialist is well advised.
Source: Forbes, “Financial planning for busy people,” Mitch Tuchman, Sept. 12, 2013