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How Debt Destroys Your Financial Health & When to Know You're in Trouble

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If you were to think of your financial health in terms of a race towards retirement, do you think you'd finish the race?

Sadly, most Americans won't finish that race and won't be able to retire comfortably, or retire at all because they're so financially unfit.


Think of it like this: If you had to walk or run a 2.5 mile race, you could probably make it to the finish line. But now take 25% of your body weight and carry it on your shoulders. Would you be able to still finish like before? How about at all? The excess weight doesn't benefit you, it actually slows you down. 

Excess debt is the same thing. Your financial health has the exact outcome! If you were to add 25% of your annual income and carry it as unsecured debt that is weighing on you, would you be able to afford retirement? How about living costs? Housing? Transportation? Food? Clothing? Health insurance? 

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And the list goes on and on...so how are you going to stay in the race?

The reality is that most Americans are financially unhealthy. We are a country that is overcome by financial sickness and we have become immune to not fully understanding where we transition from healthy to unhealthy. We fail to see what we're doing wrong. With each line of credit that we open when we can't afford it, with each brand new car we buy knowing that we could only afford used, with every medical bill that we (so unfortunately) can't pay, and with every student loan we rack up, we become sicker and sicker. Stacking debt upon debt is just like flushing bills down the toilet. 

I'll say it again: If you have 25% or more of your annual income in unsecured debt, you're in bad financial health. If you want to cure financial illness, you have to take the meds required to get healthy. 

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You're financially sick if:

  • If you make $75,000 a year and have $18,750 or more in unsecured debt.
  • If you make $50,000 a year and have $12,500 or more in unsecured debt.
  • If you make $40,000 a year and have $10,000 or more in unsecured debt. 

You're financial cure-all?

GET OUT OF DEBT

I have been practicing as a bankruptcy attorney for nearly 30 years now. Because I've just about seen it all, my first line of advice is to protect yourself and alleviate your debt in a bankruptcy. A Chapter 13 bankruptcy will afford you 5 years to repay a portion of your debt while being protected from your creditors by federal law. Inside a Chapter 13, you keep your assets and your creditors can't take you to court or garnish your wages. 

More About Chapter 13

A Chapter 7 will afford you the opportunity to have your unsecured debt discharged in a matter of 6 months. All you have to do is pass the MEANS test, and once approved, you can start over.  

More About Chapter 7

Of course, because I've been practicing for nearly 30 years, I know that bankruptcy isn't for some of you. Sometimes you simply don't need it! You do, however, need to cut your bills down and try to get out of debt through other means. The name of the game is simply as I said before: to get out of debt no matter what. 

If you need to better understand how to cut your bills in half and apply some of that money to your debt, feel free to mosey on over to this blog. It's a wonderfully composed strategy formed to help you cut your cost of living down so that you're not stressing anymore!

Slash your bills in half

Now, the question remains. How financially healthy are you? Are you fit enough to finish the race to retirement? Are you too sick to even think about running the race? Think about your current financial health, consider your options, and then take action. 

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IF YOU'RE GETTING SERIOUS ABOUT RETIREMENT:

Retire with $1 Million

Plan for Retirement Early

Why Women Should Save More for Retirement

Retirement: Men vs. Women

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