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Medical debt may be one of the primary reasons why Georgia citizens file bankruptcy; however, the inability to pay these outstanding medical or credit card bills often comes from two personal finance mishaps that seem to be an epidemic among bankruptcy filers across the country.

1. No Emergency Fund

An emergency fund is an easily accessible stash of cash that is to be used only in the event of a life crisis.  Want a new car? Don’t raid your emergency fund.  Feel like those new pair of Jimmy Choos would look great with that dress?  Better save up in a separate bank account, because raiding the emergency fund for nonessential material goods is one of the absolute worst financial decisions you can make. There are countless studies and personal finance websites that will throw statistics at you claiming that people without emergency funds are more likely to accumulate debt, but it’s really just common sense. If you don’t have any spare cash to handle unexpected life events, you will eventually rely on credit cards to get you through tough times.  So if you lose your job and have no spare cash to cover the lean months, that credit card bill will spiral out of control so that even when you do find a new job, new charges and a possibly decrease in income will make that rising balance increasingly difficult to pay down.  The solution? File bankruptcy with an experienced attorney to wipe out your debts and receive a fresh start on your life.

My advice? Put aside a little money each month in a separate savings account.  Take it as an automatic deduction from your pay check so that you do not even miss it.  Make it so you actually have to physically go to the bank to withdraw the funds.  That’s the best way to keep temptation away.

2. Buying Too Much House

It’s the American dream.  Get married. Have kids. Buy a house with a white picket fence in a safe neighborhood in a great school district. Unfortunately, all those things do not come cheap, especially in cities like Atlanta, where I often see families with mortgages that swallow 50% of their take-home pay.  As a rule of thumb, if you are paying more than 28% of your take-home pay to rent or a mortgage, you are probably living beyond your means.  After forking over 50% of your take-home pay to your mortgage lender, you have very little left over to buy basic necessities or fund a retirement, let alone save for a rainy day.  I always advise two-income couples to purchase a house with the expectation that they could still afford the monthly mortgage payment if one spouse lost his or her job.