As promised, I'm writing the second part of the topic, "Why Does God Allow Bad Things to Happen to Good People," from my Pastor's series at church. If you'd like to hear him teach it, here is a link: Pastor Russ Smith: Why Does God Allow Bad Things to Happen to Good People? Part 2 However, I'm going to type up my notes to summarize this.
Remember from part 1, because we are all sinners and none of us are good (Romans 3:12: "They are all gone out of the way, they are together become unprofitable; there is none that doeth good, no, not one."), the question is really, "Why does God allow bad things to happen to bad people?"
1) Because of our Sin. While a child thinks in his or her mind it is bad to go to bed at 8 pm, or it's bad to be forced to clean his room, or bad to have to eat her veggies, there is a purpose in these things. It is to REDIRECT US. We don't want bad things to happen to our children, but because of their sin and the bad choices they will make on their own, we sometimes have to "inflict" bad things on them, which aren't really bad, but in their minds it is terrible! It's like a punishment sometimes to have to clean their rooms! Why does God punish? To redirect us toward Himself, where there is true joy, peace, and happiness. Eternal blessings in heaven and earthly blessings will result, which makes our discomfort worth it. It gets our attention so we can focus on God and the things that are really important.
2) To Strengthen Us. James 1:2-4: Trials in our lives condition or strengthen us, much like a body builder has to go through the pain and suffering of weight lifting to build muscles. We have to sacrifice some of the things we want for the things we need in order to be healthy. Weight lifting builds endurance, and God wants to grow us to our fullest extent, to perfection or "maturity." We won't be sinless, but stronger. God knows best, even if we don't want to be stronger. He'll push you harder like a good trainer would do, knowing there is more to attain. We were created to be close to the Lord, and we can lead others to God as well. God's plan requires strength, so trials will help accomplish that.
3) God's Will. 2 Peter 3:9, Isaiah 55:7-9, 2 Cor. 1:3-6. Sometimes bad things happen, and someone else will benefit as a result. The experience gained will help you to comfort and understand the sufferings of others. There's nothing in it for you, but for others, and to bring glory to God, although the experience may help you to handle further troubles. One interesting analogy given by my Pastor was a baseball coach puts the players where he thinks it is best for the team based on their abilities. A new player may want to play shortstop, but may start out in right field, for example. Then he may be put on 3rd base. The coach has the eagle's view, and will do what's best for the whole team, not just your desires. God sees the whole picture, and the past/present/future. He may allow a certain job you hate to give you experience so later you can get the job that will be your dream come true. It wasn't that God was being mean to you, but just the opposite - preparing you for better things to come.
4) Man's Choice. Rom. 5:15-16, James 1:13-15. We sometimes just have to own up to the choices we've made. Don't be mad at God, but rather be mad at Satan for tricking you! Does God need to tie us to a tree so we won't make bad choices? No! Then we'd cry for being tied to a tree and not having our free will. Laws of nature have certain consequences, such as jumping off a cliff, eating fast food, chopping off an arm, abusing relationships - when things go south, we shouldn't be surprised.
Can good people make bad choices? No, because no one is good.
Can bad people make bad choices? Yes.
Do bad people make good choices? With God's help, yes.
God is the standard for right and wrong, and when making choices in faith with the power of the Holy Spirit, we can make good choices. Our bad choices lead us to hell if we reject Christ; we shouldn't be shocked when our bad choices lead us to destruction.
I hope this gives some helpful perspective on this very practical topic.