As someone who has helped people with debt and money troubles since 1994 I’ve seen thousands and thousands of consumer situations when dealing with all sorts of debt. From mortgages, credit cards, car loans, bank loans, personal loans and students loans; I’ve seen it all.
I’ve worked with people with gambling problems, shopping addiction, overspending, oversaving, and over everything else. I’ve even written books on the topic of debt and dealing with debt.
Then, having lived through my own financial problems, been an avid student on the history of debt, and paid close attention to behavioral economics; I’ve looked at debt from all sides.
I don’t think there is any dispute that my experience gives me a unique perspective on the entire consumer debt issue. So what I am going to say next might surprise you.
The system to deal with your debt is totally rigged to screw you.
Yes, that’s right. There is hardly ary part of dealing with debt or getting out of debt that is designed to provide you with the best ways to put your debt behind you.
Ultimately the problem is the greater YOU. Consumers are their own worst enemy. And I already know if you are reading this you are going to be in total denial that anything I’m saying applies to you. I accept that and I get it.
But behind your back you want to know what experts say when you aren’t listening? The common refrain is “people are stupid.”
And that’s not said in a mean way, but out of frustration.
People make horrible decisions on how to deal with their debt not because they consciously want to make bad choices but primarily because people listen to their inner assumptions and not seek truth and logic.
As humans we are driven more by emotion than by logic and commonsense. As an example, bankruptcy is most often the least expensive and best solution to overcome problem debt, enhance retirement, and boost credit scores. It’s a fact. Yet nearly 9 out of 10 people I try to explain that too will tell me bankruptcy is amoral, will hurt their credit score, and should be avoided at all costs. But are beliefs, truths? No.
Absent facts, every belief is a truth. But even that’s not true.
False assumptions about how to best deal with debt results in belief in bad choices. It is said, “When your deepest convictions are challenged by contradictory evidence, your beliefs get stronger.” – Source
The hardening of incorrect beliefs is called the backfire effect.
So Here Is Why People Fail
People will trust their emotions and beliefs over just about everything else, including facts and logic. They will allow themselves to be manipulated by debt collectors who scare them and debt relief sales people who pitch magical solutions. People will make horrible decisions because of hyperbolic discounting. People will literally throw away a future retirement of financial safety because they make choices based on emotional beliefs.
And when confronted with the reality of their bad decision making and a better solution, people get angry because their beliefs were challenged. It’s just too difficult for people to admit that some of the assumptions and beliefs they hold are wrong. Rather than make good choices people will double down on the wrong path and then be more inclined to blame others for their inevitable mistake and poor outcome.
The “system” is rigged against you because everyone else but you is acting in their best interest and even you are acting in the best interest of your emotions and beliefs, and not making the tough decisions that will help you emerge faster and better from a bad debt situation. Most people are unwilling to let the truth in over ingrained beliefs.
People will delegate, relegate, assume and assumpt dealing with their debt to their emotional self and in the end they will get a crappy outcome to a tough solution.
The worst part is, it’s all avoidable.
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