Fundamental Problem With Debt Consolidation

Posted by The Happy Rock on November 19, 2008

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Putting debt on a 0% credit card or rolling high interest debt into a home equity line of credit may help save you money in the short term, but it is only addressing the symptom. The symptom is the debt; the debt isn’t the problem. The behaviors and attitudes that got you into debt are usually the problem.

Imagine a couple in a pool flailing around unable to swim or even tread water. You through them a lifeline and they are saved. The trick is though that they only stay saved if they don’t go into the water again. Unless they learn how to swim they are going to continue to have the same problems if they go in the water.

The same is true for money, although unlike avoiding water we can’t avoid spending, earning, and needing money. The only other option is to learn how to swim. We need to change our relationship and behavior towards money. Debt consolidation often helps people escape the symptoms of their problems without having to actually address the issues. Bankruptcy and bailouts usually have similar deleterious effects. People who roll their credit card debt into a second mortgage often find themselves with credit card debt again and now they have a second mortgage to boot.

The way issues get addressed is often by hitting rock bottom or the end of your preverbial rope and coming up with a real desire to change your behvaior and your financial destiny. Feeling pain promotes real change. Watching other people suceed inspires change. Hard work, discipline, and repitition change behavior. Focus on the problem not the symptom. Fix the problems and the symptoms will go away with some hard work.

» Filed Under Debt Elimination, Psychology of Debt

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Comments

9 Responses to “Fundamental Problem With Debt Consolidation”

The Debt Defier on November 19th, 2008 1:24 pm

So far the only debt we’ve consolidated have been student loans. But I know some folks who did what you alluded to, even as they were outwordly professing their desire to become debt free.

Looking back I think they had a Dave Ramsey moment. They were going to downsize their lifestyle and help their kids with college expenses.

But the moment was fleeting. After talking to their banker they refi’ed their house and soon they bought a new truck, a convertible, two scooters, and upgraded their RV.

They don’t talk about getting out of debt anymore.
ChristianPF (8 comments.) on November 21st, 2008 12:54 pm

” Focus on the problem not the symptom. Fix the problems and the symptoms will go away with some hard work.”

very well said. This is so true in almost every area of our society. We are way too focused on fixing symptoms rather than getting to the root of the problem.
The Happy Rock (268 comments.) on November 24th, 2008 1:44 pm

@ChristianPF - I think you are right. The symptoms are usually easier and more tangible. Fixing the cause usually requires more effort, change, and more humility.
Bankruptcy Regina (1 comments.) on December 30th, 2008 4:22 pm

Great article! We take the same approach in communicating these valuable facts to our clients. I have bookmarked this post and will share it with the rest of my team.
Jonathan Browne (1 comments.) on January 2nd, 2009 5:33 pm

Absolutely, the true key to getting out of debt is stopping an addiction to spending on unneeded items and make a commitment to lower monthly expenses.

read my article on addictive spending here