Debt is Not the Problem
Posted by Christi | Filed under Christi
That’s right. You heard me. The reason you are reading this blog, the reason you watch Till Debt Do Us Part and Princess, the reason you search this website, is not because of your debt. Debt is not the problem.
Time and time again, I hear people say to me, “These interest rates are killing me! I can’t believe they can get away with charging this much interest. If the interest wasn’t so high, maybe I could pay down my debt.”
Wrong. Interest rates are not the problem.
“Well if my credit rating wasn’t so low, I could get approved for a consolidation loan! It’s such a stupid system anyways…”
Sorry. Your credit score isn’t the problem either.
“But if the bank would just give me a consolidation loan, then I’d have a real solution! I could have one monthly payment, and a lower interest rate.”
Incorrect. Not getting a consolidation loan is not the problem.
Some people think if they can get ANY consolidation loan, their problem is solved. “Who cares if the interest rate is a bit higher? It’s only a 5 year loan; we’ll be debt free soon!”
I apologize for sounding like a broken record, but that’s also not solving the problem.
“Luckily we have equity in our home. We can use some of the equity to pay off our debts, and finally we’ll be debt-free forever!”
Nope. Wrong. Wrong, wrong, wrong.
“If only my parents were better off”, “If only we would win the lottery”, “If gas prices wouldn’t keep going up”, “If houses didn’t cost so much”, if only, if only, if only…
If I haven’t made myself clear yet, it’s not the debt that is the problem. It’s not the interest rate, the credit rating, the payments… It’s what’s causing the debt, that is the problem.
There is a rule of cause and effect. If your debt is the effect – what is the cause? Your debt is a consequence of your actions. Grab your metaphorical shovel and dig deep, real deep, and think back through the years. What have you been using credit for? No, I don’t mean “well my cable bill gets automatically billed to my credit card”. I’m talking WHY.
Why have you had to reach for your credit card? Does over half your income go towards your household bills? Do you eat out too much (me)? Do you shop when you’re sad? Do you make a budget and never take it off the paper? Do you just not have enough income to go around?
My then-boyfriend, now-husband and I wanted to live a certain way but truthfully and honestly didn’t have the means to live that lifestyle at the time. I was young and still in university. He was just beginning his career in I.T. We had to do one of two things – increase our income, or adjust our lifestyle. We decided to do both.
We also consolidated our debts. Yes, lower interest rates and having one manageable payment may be part of your solution, but there’s more to it than that. Here’s a prime example as to why: When we were up to our eyeballs in debt, we consolidated our debts to lower our interest rates and to have one easy, monthly payment. We vowed that it would be the end of our debts; we were never going to use our credit cards again! But every time I tried to live life on a budget, I remembered something else I “needed” to buy that wasn’t in the budget. Do you think we were the first couple to consolidate and then rack up debt again? Ha!
We weren’t getting to the root of the problem. We consolidated, but we kept up the same lifestyle using credit , so whammo, we were in debt again. It was a hard lesson for us to learn, and it was a shift in our mindset that became one of the keys to our success. Debt is all about attitude, and when our attitudes improved, so did our finances. Our budget didn’t stand a chance until we changed our attitude and the habits we had that kept us in debt.
With baby steps, we addressed the cause of our debts and were able to gain control over our spending. You can too. So tell me, what is the root cause of your debt? What have you done to overcome it?
Until next week,
Christi Posner (@ChristiPosner)
Christi Posner is a Credit Counsellor for the Credit Counselling Society, a non-profit, charitable organization. Born and raised in Winnipeg, Christi is a newlywed, a new homeowner, and with the exception of car loans and a mortgage, she is newly debt-free. Her goal is not merely to survive, but to financially thrive; and to do so with some passion, empathy, humour, and a smile.
May 12, 2012 at 8:42 am
We didn’t have debt but we sure weren’t saving the way we should have been. In our case it was the fact that we had the money so why not enjoy it? So we spent and spent and spent on everything and anything that we wanted always figuring that since we weren’t in debt it was o.k.
And little by little (and when we’d make a big purchase a lot by a lot) the savings we had started to dwindle until I stumbled across Gail’s show and realized that if we kept it up, we’d one day find ourselves without savings or even worse, in debt.
So we made up a budget. We set up automatic withdrawal for savings in various accounts so that that money no longer felt “spendable.” I decided to get a part-time job to boost our savings and give us just a little more mad money, became more religious about reading the flyers and we stopped shopping as entertainment.
We’re back on the right track and after 3 months it’s becoming easier to balance things. We’re saving for some big projects, we’ve priced out vacations and remodels for the house and we’ve even figured when and how we’re going to save for Christmas this year. The kids are now on an allowance too which helps.
All in all it’s been a wonderful change for the better and because we caught it before too much damage was done, it was relatively painless.
May 12, 2012 at 2:27 pm
Thank you for your insight Julie! Looking through the flyers is something I may have to start doing too but I’ve avoided it in fear of wanting to spend money unnecessarily. And yes, shopping for entertainment is big one for a lot of people! I don’t think you’re the only person that has/had the mindset to just enjoy life but it doesn’t need to come from spending money, right? Many other options out there! Great work with the budget. Do you feel better than you did when you were spending, spending, spending?
May 13, 2012 at 9:04 am
Better? no not really. More responsible? definitely. I won’t lie and say it wasn’t great fun to shop because it was. I do miss it but I also really like the feeling that I’m building a more stable future for myself and my children.
May 12, 2012 at 11:48 am
My problem isn’t having too much debt, it’s dealing with the debt I do have and decidin that now, while I can, is the chance to pay it off. Thank you for your delightful words, Christi! You are truly inspirational and I enjoy reading your blogs each week.
May 12, 2012 at 2:29 pm
Aww you’re so sweet. Thank YOU! It’s important to realize what caused the little debt that you do have to make sure you address it now so that it doesn’t come back. Good luck!
May 13, 2012 at 10:13 am
Another great blog Christi…you make me reflect on my finances every time. I think of where we were and where we are now. What a long, treacherous debt road we travelled. I think we consolidated at least ten times over our years, the first one was for thirteen thousand dollars when we had one child and one on the way. It just about killed me to consolidate such a large amount (at that time). Circumstances, not excuses, sometimes pave the debt road for people too. (OK, there were SOME excuses). But you are correct, debt was not the problem all the time. We needed someone like you to educate us thirty years ago. No one talked about “How to do it right” back then. I am so glad that there are people like you out there and shows like Till Debt to us Part to guide us along the way now. Thanks for your insight! I look forward to your next blog.
May 16, 2012 at 5:17 pm
I agree with you – sometimes circumstances pave the debt road for people. It’s not always excuses. We don’t choose to be unemployed, to get hurt and be on disability, to have a child who requires extra care. This is what life hands to us and we have to find a way to deal with it. But sometimes, we do just make excuses for ourselves and say we deserve things. The point is to just be more conscious of the “why’s” and in turn make smarter decisions. Thanks for the comment!