I recently saw an article in the USA Today titled, “For Many Over 55, Debt Defers Dreams.” Many baby boomers thought they were on easy street as the stock market continued to grow higher and higher in 2006. Suddenly we hit the great recession and life no longer had a silver lining.
As a young man, I often picture the baby boomer generation with mini-yachts and hefty investment accounts. Apparently my mental picture is a little too rosie since 17% of the bankruptcies filed last year were from baby boomers!
What is causing all of these middle-aged people to file for bankruptcy?
(1) Retirement – Apparently there were some folks that retired, but were not financially ready.
(2) Credit Cards – Many blamed their bankrupcies on credit card debt. Isn’t this crazy? When I think of reclace swiping, I picture a 19 year old with a big screen TV in the cart. I definitely do not picture a 60 year old with over $20,000 in credit card debt. But, when jobs are lost and emergency funds are not in place, this is what happens.
(3) Assisting their children – This one blows my mind! When I was a young teenager, I was expected to get a job so that I could afford to buy a car, not to mention the gas, insurance, and car repairs. It was a great lesson and I greatly valued all of my possessions because I worked hard for them!
Today, teenagers are not looking for jobs. Do you know why? Their parents give them cars and pay for all the expenses! Who needs to get a job when there’s nothing to pay for. I could go on and on, but for your sake, I will stop now….
In summary, apparently parents are giving their children money even when they have none. I imagine most of these children aren’t really children anymore. They’re most likely mid-20’s and need to be booted out of the house.
(4) Medical Bills – This is a killer no matter what age you are. If an accident happens and medical attention is necessary, there will be large bills. One must be certain that they have good insurance and a proper emergency fund to avoid this one.
Make sure you learn from these mistakes
Not all people that go bankrupt are “bad people”; they may have just had a large unplanned expense that set them back farther then they ever expected. In order to avoid bankruptcy, make sure to set up your initial emergency fund, utilize the debt snowball method to get out of debt, set up an emergency fund that covers at least 3 months of expenses, and begin putting 15% toward your retirement investments (these can include business investments in my book – rental properties are a good example).
Does the Baby Boomer Bankruptcy surprise you? Do you know of anyone that went bankrupt in their 50s or 60s?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.