In North America, recent statistics showed
that it's mostly the average person that files
for bankruptcy instead of businesses.
In the ’80s, businesses accounted for 13 percent of bankruptcies, whereas today they
account for only about 3 percent.
That’s why today we’re going to talk about the 6 reasons why people go bankrupt, and
how YOU can avoid it.
It’s Your Unlocked Potential, and let’s talk about financial improvement.
let’s go!
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Number one
Poor Investment
In 2017, cryptocurrency became part of the mainstream media news.
Bitcoin rose to around $20,000 per coin
and many people jumped on the bandwagon
Just earlier this year, Bitcoin was worth only around $5,000
So, if someone bought at $20,000
and panic sold at $5,000
they would have lost so much
There's a common saying that goes
"Don't invest in something you cannot afford to lose"
While this may seem like common sense for most,
it does happen more often than you think
From stocks to funds to cryptocurrencies and even businesses
There are always some uncertainties involved.
An investment without proper knowledge or experience can lead to bankruptcy
The best way to prevent this is to learn as much as possible before making a huge investment.
Get help from experts and invest in a more stable market if unsure.
My recommendation is to first hit that like button and subscribe to this channel
for improvement videos every Sunday.
Investing in yourself is the best investment.
Back to the topic, don’t invest in something you don’t understand
Do your own research.
If you want to invest, I recommend investing in index funds.
The best index funds, even at times of recessions like right now, are considered “recession-proof”.
Index funds such as VOO, SPY, IVV, and VTI are some of the best index funds you can invest in.
If you’re in Canada like me, I personally like VFV and VSP
which have been doing quite well even during this recession.
On average, if you invest in good index funds,
you will average out to gain around 7% year.
And that is much higher than the measly 1.5% to 2% interest you get from banks.
Number two
Divorce
A sensitive and tough topic for some
but a lot of people go bankrupt because of divorce
Legal services alone can be costly.
Also, any shared responsibilities such as joint accounts,
joint credit cards, and loans need to be considered.
Assets are not always divided equally.
Even if your partner did not contribute anything to the house, they may be taking a share if
there are no legal contracts.
One way to protect your asset is to have a prenuptial agreement or a marriage contract
It is also important to keep your wills and prenuptial agreement updated and ensure that
both aligned in case of unexpected events.
One thing to note, however, is that prenuptial agreement has more weight compared to a marriage contract
While it is a sensitive topic and a romance killer, from a financial standpoint, it is
important to expect the unexpected.
Number three
Addictions
If you were to spend money on things such as alcohol, gambling, drugs, and other addictions
excessively, then you may be on your way to bankruptcy.
This reason for bankruptcy is a bit vague, as bankruptcy includes a legal component to it.
But when an addiction gets too much, loans and credits may be made
and a substantial amount of debt can accumulate.
And that is the problem.
The best way to stop plunging into debt or bankruptcy is to stop the addiction, as these
addictions are the root cause of financial problems.
However, it is easier said than done.
So, it is important to seek professional help like doctors, psychiatrists, addiction specialists,
or rehab centers.
Drugs are bad, you shouldn't do drugs
Number four
Getting Scammed
Scams are everywhere.
From annoying telephone calls to even your friends and families trying to sell you a product
They might not even know it's a scam.
With the telephone calls or strangers, they’re out to get any information they can
out of you.
One of the scariest scams is identity theft.
All they need is your social insurance number (SIN) because it contains all your personal
information.
When they take your identity, they can easily open up bank accounts and credit cards under
your name and spend it on whatever they want.
This does not only put you in debt, but it is harder to track
because it’s under YOUR name.
By the time you get a notice, the debt collectors are already looking for you,
and the debt may already have accumulated to thousands
and thousands of dollars.
Another type of scam is pyramid schemes.
In a pyramid scheme, only the people at the top of the pyramid will make any real money.
Some pyramid schemes can even disguise
as an MLM (multi-level-marketing) or network marketing business.
So, what can you do about it?
First, always protect your SIN very carefully.
Second, always research the company and see the reviews before joining any companies.
See if the company is closely related to a pyramid scheme or MLM.
And NEVER join a company if they prioritize recruiting over selling their product!
Number five
Loss of Income or Unemployment
When you have liabilities such as house, car,
or other debts, loss of income can cause one to go bankrupt.
This reason is simple.
The money you need to pay for stuff is a lot more than the money you’re getting.
For ones who cannot liquidate their assets or have signed a contract they’re unable
to withdraw, they may be on their way to bankruptcy.
A recommendation for this one is to always have some savings and not live day by day.
Also, sign up for unemployment insurance if your company does not cover unemployment.
Otherwise, in times of recession or global crisis, you may be out of luck!
Number six
Medical Expenses
People living in countries such as Australia,
Canada, The Netherlands, and the United Kingdom, just to name a few, don’t need to worry
about their medical expenses because it is part of the country’s healthcare system.
However, someone living in a country, such as the United States that has private healthcare
unfortunately, has a much higher chance of going bankrupt.
A recent study published in the American Journal of Public Health found that 66.5 percent of
all bankruptcies were related to medical issues.
That is over a whopping two-thirds of ALL bankruptcies.
The bankruptcies are either due to the high cost of medical care or time taken away from work.
It is estimated that 530,000 families (over half a million families) file for bankruptcy
each year because of medical expenses.
The average cost of delivering a baby in America without complications is $10,808.
This number can easily increase up to $30,000 with pre-pregnancy and post-pregnancy care,
and with complications, the fee is even higher.
If you have insurance, sure it does help
But many surgeries, depending on the type, can go from a couple of thousand dollars to hundreds
of thousands of dollars, and insurance companies usually only cover a percentage.
So, it should come as no surprise that medical expense is on this list for countries like
America.
How do you avoid this type for bankruptcy?
A recommendation is to get life insurance or critical illness insurance as that can
give you financial security in the case of unfortunate events.
I mean, you buy insurance for your car, for your house, your pet, so why not for yourself?
You’re the most essential being in your life, so it is always better to be safe than sorry.
And again, it is important to have some emergency savings.
Any liquid asset will be very helpful.
Lastly, prevention is the best medicine.
Do your best to eat healthy, exercise, and improve your lifestyle, so the chance of you
getting sick becomes lower.
Do you agree or disagree with these 6 reasons?
Do you know any other reasons an individual may file for bankruptcy?
Let me know in the comment section down below – your opinions and views matter to me.
Finances are a big part of our lives and bankruptcy can set you back.
Don't let it be you.
I wish you financial success and let’s all improve our financial literacy.
I’ll see you all next week Sunday!
Cheers!
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I want to thank you very much for watching!
Have a wonderful rest of the day.
Cheers!
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