In the 1990s, Lil’ Kim was one of the hottest women in hip hop. Her debut album Hardcore went platinum twice on its way to selling more than 5 million copies worldwide. If you were to visit just about any male college dorm room in the country in 1996, you would be hard pressed to find a wall that wasn’t adorned by the “Queen Bee.”
Earlier this month, Kimberly Jones (aka Lil’ Kim) filed for Chapter 13 bankruptcy protection in New Jersey. According to the filing, Jones has $4 million in debt and very little in liquid assets. She may also be auctioning off her $2 million Alpine, N.J. home.
What went wrong? Jones claims that her income dropped by 50% three years in a row from $800,000 to $400,000 to just over $200,000 currently. In other words, her income dropped, but her debt payments and lifestyle costs did not decline similarly, pushing her into bankruptcy court.
What can we learn from Lil’ Kim?
According to Forbes magazine, the top 5 reasons people file for bankruptcy are:
- Medical expenses
- Unexpected job loss
- Poor/excess use of credit
- Divorce or separation
- Unexpected expenses
Focusing just on the top two items on the list, the solution revolves around ensuring proper medical insurance coverage and maintaining an emergency fund of no less than six month’s worth of living expenses.
When it comes to medical insurance, there are many options for coverage today. Medical insurance is not solely a work-benefit, it can also be purchased in the private market or through healthcare.gov. The key, however, is to maintain medical insurance coverage at all times. You never know when an illness will come, or whether the timing will coincide with job loss.
Maintaining an emergency fund would be helpful for 3 out of the top 5 causes of bankruptcy. An emergency fund is the first line of defense for your financial plan. Instead of maxing out your credit card, raiding your 401k, or begging friends and family for money, you would tap into your savings.
Here are some other good tips that should keep you and your family out of the bankruptcy court:
- Get on a Budget
You will need to get very honest with yourself about your finances and your lifestyle. Knowing how much money you have and identifying where it needs to go BEFORE it hits your account will give you a clear path on how to make your money work better for you.