No one ever plans to go bankrupt, it can happen to anyone. Whether it’s due to credit card debt, student debt or healthcare costs, bankruptcy is on the rise among young adults. Today, the attorneys at Groce & DeArmon identify the primary reasons why young individuals file for bankruptcy, as well as some tips for avoiding this situation.
Rising debt among the youth is worrisome, but especially student debt. Since the average student has trouble paying for school, borrowing for student loans has risen in recent years. Tuition is higher and there’s less money available for financial aid. As a result, many college students are turning to credit cards as a quick substitute for cash. Also, students may have difficulty finding a part-time job and therefore don’t have enough to make payments. Many young people could face an increasing weight of debt before they start working full-time, which may lead to bankruptcy.
Related Post: An Overview Of Student Loans and Bankruptcy
Similar to student debt, credit card debt is a concerning trend. Often times, inexperienced cardholders get their first credit card and spend irresponsibly. After reaching their credit limit, they might apply for another card. Thus, a vicious cycle begins of maxing out credit cards. If you’re not careful, you or someone you know could be thousands of dollars in debt, without any idea how to pay off all of these bills.
Some health insurance plans allow young adults to remain on their parents’ plans until the end of the month following their 26th birthday. Because of certain policies, many young people do not carry health insurance. Without insurance you take risks. For example, a serious car accident or an illness can put you in a lot of debt, especially if you don’t have insurance to cover the medical costs.
Tips for Avoiding Bankruptcy
- Consider Using Cash
Since we have moved from a cash-based society to a credit-based society, it can be easy to lose track of how much we’re spending. We swipe the card and don’t think about all these payments adding up. Before we know it, debt piles up and panic ensues. Instead of paying with credit cards, consider using cash as much as possible.
- Determine a Need vs a Want
When it comes to personal items, it’s important to distinguish between basic needs and wants. Whether it’s a flashy branded item of clothing or an expensive car, what you want may not be something you really need. Getting massages and buying another pair of shoes may seem like a necessity at the moment but might become a regret later on.
- Create a Monthly Budget
The key for young adults is to learn how to set up a budget and stick to a monthly plan, which can keep you from excessive, impulsive spending. Have a separate category for what you’ll use for entertainment purposes, and prioritize the essentials such as gas, food, and rent. These days, most bank accounts have a mobile app with your account information that allows you to closely monitor your expenses.
- Take a Course
Sometimes students run into financial trouble even before college. In general, high school students would benefit from taking a financial education course. Money management is a vital skill that young people must apply in order to be successful adults. Schools (and parents) can emphasize the concept of moderation, which will strengthen money management skills.
Contact Groce & DeArmon, P.C.
If you are considering bankruptcy, and you are overwhelmed with debt, reach out to our bankruptcy attorneys. At Groce and DeArmon, we understand the difficulties of debt and offer the legal aid you need to file for bankruptcy. We also provide resources for credit counseling. Call us at 417-862-3706 or contact us online today.