Debt Free

In your quest to attain that zen-like state of being debt free, something to avoid is obviously the pinnacle of debt, bankruptcy. One of the largest causes of bankruptcy in the U.S. is medical or health problems. These conspire to hit you from both sides; you are too sick to work, and you rack up outrageous bills. It is, however, better than the alternative, death. A study of 1,771 bankruptcies from Harvard University by Himmelstein, Thorne, Warren and Woolhandler (sounds like a law firm) released in 2005 found that over 46% were caused by health problems and medical bills. This was later disputed by a Dranove and Millenson paper, claiming the true number was closer to 20%. Their conclusions have been vigorously challenged by the paper's original authors. Medical and health problems are, in fact the second leading cause of bankruptcy, trailing only job loss, which can, itself, be caused by health problems.

First of all, there is no actual type of bankruptcy called a “medical bankruptcy”. You won't get any special treatment because your problems were caused by medical conditions. There were slightly over 1.6 million personal bankruptcies filed in the US in 2005. These were divided about 2/3 chapter 7 and 1/3 chapter13. This number and distribution has remained relatively constant for the past three years, although the Federal bankruptcy legislation passed last year will probably change it to increase chapter 13 filings.

There are some things you can do to help ensure you don't get caught in the medical bankruptcy trap.

First of all, do whatever you can to make sure have health insurance, if at all possible. That, however, will not automatically protect you from being liable for massive medical expenses. In the aforementioned Harvard study, over 75% of the participants had health insurance. As amazing as it sounds, some of those experiencing medically related bankruptcies thought they were covered by insurance, when in fact, they were not. Before visiting a physician, you need to verify your insurance coverage is in effect. This is especially true if you've recently changed jobs.

If your insurance demands that you get a referral from your physician before seeing a specialist, make sure you follow the proper guidelines. You could get completely screwed for big money if you visit a specialist (the most expensive type of doctor, by the way) without the proper referral. You need to be intimately familiar with the requirements of your insurance plan. If your employer offers different plans, carefully analyze the plans before choosing one.

If you are able to, get supplemental insurance to cover the costs not covered by your medical insurance. This is nice because if you or a member of your family is hospitalized, your bills will continue to come rolling in, while your income may not. Even if you continue to get paid, you can incur many thousands of dollars in expenses that are not covered by insurance. Usually, supplemental insurance is fairly affordable, depending on how many different types of coverage you get. You can get coverage for hospitalization, cancer, and other conditional coverages. Check with your chosen provider. As an added bonus, in many cases, these types of insurance can be paid for using pretax dollars, effectively giving you a little premium reduction.

Once you're properly insured, and you're following all the conditions of your medical insurance, you need to make sure you're living right. Prevention is worth a pound of cure, as they say. Exercise and eat right. If you can get into a regular exercise routine, it will be better than trying to sneak in a bit of cardio whenever you can. A lifestyle change is better than a diet, and easier to maintain too. Diets seem to come and go with every new year.

Try to get involved in some type of sporting activity for cardio vascular fitness. That seems to be a heck of a lot easier for many than getting a sore ass watching ESPN on the bike at your local club. The whole thing is to stay on the right track. It goes without saying, but I will anyway; Don't smoke. If you do, quit. If you never started, well, you're feeling pretty good about yourself, aren't you? Stay away from trans fats. Some of the latest research indicates it's one of the most important diet issues in preventing heart disease. So much for that linguine at Alfredo's. Get in shape, you'll look great and feel better too. It's a lot easier to say it rather than do it. It'll be worth it, though. It's best to try and stay away from the hospital in the first place.