Medical debt affects an estimated 2 million Americans leading over 640,000 to file for bankruptcy each year but healthcare emergencies are just a part of the issue as Americans in general also have to deal with credit card debt. The good news is, a payoff plan can save American families from foregoing healthcare to pay credit card debt and avoid filing for bankruptcy when a medical emergency arises. As America’s credit card debt goes up nearly 3% according to Experian, many Americans struggle to make payments while barely covering necessities such as healthcare for themselves and their children. The total credit card debt in the US has surpassed $1 trillion based on a report by the Federal Reserve and the average American now has an estimated $6,375 in credit card balance.
Debt and Access to Healthcare
With health insurance often failing as a safety net, according to a New York Times article in 2016, millions of Americans who get serious ailments often fall into debt due to medical bills. One example is Carrie Cota, a travel agent from California. Cota, according to the New York Times, had lupus in 2007 and had to spend thousands of dollars in medical bills. Cota would later lose her job and her house.
However, this can also happen the other way around. With Americans owing thousands of dollars in credit card debt, many could no longer afford to pay for health insurance for the whole family. Others who do not have insurance cannot afford to pay for healthcare out of pocket. When a medical emergency strikes, the budget that was never enough in the first place will result to a precarious situation.
Good Credit Management Can Save the Day
A Harvard study notes that 62.1% of bankruptcies in America are due to medical bills but the numbers differ depending on which study one is looking at. A study done by the Kaiser Family Foundation found that 1 million adults filed for bankruptcy in 2015 and that 52 million Americans ages 18 to 34 cannot afford or struggle to pay for medical bills. Effective credit management takes front and center when trying to avert financial emergencies, according to Forbes magazine. Forbes notes that 44% of American adults do not have enough cash to cover for an emergency that costs $400. This can be rather problematic for the average American but there are ways to handle debt while ensuring all other needs are met.
Good credit management is key but it also involves realistic financial forecasts, according to Entrepreneur magazine. Being optimistic can be tempting but economic uncertainty has to be kept in mind. Certain scenarios such as losing a job or having to pay for hospitalization should be considered in a household’s financial forecast which means that an emergency fund has to be opened to cover for emergencies.
Dealing with Debt
No matter how huge the debt is, it is possible to pay it off slowly. According to former contributor of U.S. News David Blake, “The first step to solving your debt problem is to establish a budget.” Blake adds that using personal finance tools can make budgeting easier. Hitha Herzog, a finance expert also has her own take on how to deal with debt. She says that it is important to pay expensive debts first i.e. the ones with high interest rates so that you won’t accrue additional debt. If one credit card has a higher interest rate, it is best to pay a big chunk of it and make minimum payments for the others until the expensive debt is paid in full. Once your most expensive debt is paid, you will have more money to pay for your other credit cards. Herzog notes that when you get to this point, it is ideal that you pay more than the minimum. Dealing with debt while ensuring that there is enough money for healthcare can be stressful but as the old adage goes, “If there’s a will, there’s a way.” All it takes for you to get back on track is the discipline to enforce your budget and to pay off all existing debts while still setting money aside for emergencies.