I want you to imagine something…
You’ve just gone downstairs into your basement (in this world you own a lovely house with a basement… yay!!!) and you instantly notice two things:
- There is about a foot and a half of water covering what used to be a very fine shag carpet
- Someone’s stuck a garden hose in your window and it’s adding more water by the minute
What do you do?
a) grab the ole wet dry vac and start cleaning up the water in your basement? OR
b) run out of your house, turn off the garden house and figure out who the %&$# put it in there in the first place?
You’re of course entitled to your opinion, but I feel like the best solution in this case is to figure out the whole garden hose situation… right?
But that’s not always how we think about debt.
Well… that’s kind of a stupid statement isn’t it? Of course your debt is a problem, but it’s not the problem.
It’s just like in my brilliantly crafted water metaphor…
The water in your basement is a huge problem, but it’s not a problem worth solving until you fix the real problem… the source of the water.
I talk to a lot of people about debt, and so many of them are just demoralized.
They’ve tried to pay it off, but they just can’t seem to make any headway. They’ll make a dint in it, and then it will come roaring back.
And they’re spending a ton of time and money trying to fix the problem, except that it’s the wrong problem… or at least it’s the wrong problem to start with.
Fixing the leak before you wipe up the mess…
I’ve had two major debt sources in my life: tax neglect and dental neglect
I’m self-employed and therefore it falls to me to set aside my own taxes… which I was NOT doing. So when the government came to collect… I didn’t have any money for them…. and somehow ignoring their calls and letters didn’t seem to make things better.
I was thousands of dollars in debt.
The dental side of things was more subtle. I don’t have the best teeth, but I also didn’t take care of them and ate forty tons of sugar a week through my teenage years. Somehow that combination of circumstance led to a mouth full of cavities that I refused to treat (being a ‘poor’ student and all).
The need for fillings became a need for root canals and before I knew it I was sitting on the requirement for over $12,000 of dental work.
In both these circumstances I had major problems that had led to pretty predictable results.
• don’t set aside money for taxes… you’re going to have tax debt
• don’t take care of your teeth… they’re going to rot and cost money to fix them
If someone would have swooped in and covered both those dollar amounts… it wouldn’t have really fixed anything (although it would have been really really nice).
What I needed to do was ‘fix the leak’… and that’s what I (eventually) did.
I won’t bore you with the details, but suffice it to say … I got an accountant, I set up a savings account, and I built a habit that had me taking of a big percentage of every cheque that came in and putting it aside for the government. I also stepped up the brushing, floss twice a day and stopped drinking three slurpees for after dinner treats.
And eventually… I paid off the debt.
The nice thing was, since I had done the work to stop the source of that debt, I only had to pay it off ONCE.
Paying off debt is hard… so make sure you only have to do it once
This is what I work on with my clients.
Sometimes I even ask them to… gasp… wait to pay down high interest debt… 24% credit cards… until they’ve set up a system and a structure that allows them to pay it off for the last time.
Because a major cause of debt for people is that their monthly cashflow doesn’t add up.
They’re expenses are higher than their income.
And that tends to create some debt.
But if that’s the case, it’s useless to lecture about ‘the costs of high interest debt’. It doesn’t matter how ‘full the basement is’ if there’s a garden hose adding more water to the problem by the minute.
What people need is help getting control of the cause of their debt, and then they can work on cleaning up the mess once and for all.
So… how do you do that?
Ya. Isn’t that the question you’d love a 5 step checklist for…. well I tried with the infographic above… it’s not as easy as that might sound.
In reality it’s both simpler and much more complicated than paying off the actual debt. Simpler because it’s really about answer the question: where is this debt coming from?
And more complicated because it can’t be fixed by a ‘side hustle’ or ‘consolidation’.
It’s about behaviour, and habits, and self-awareness.
It’s about really honest with yourself about the consequences of the choices that you’re making.
It’s about changing some of the things that you might really like about your life.
And that shit is hard.
But unless you answer it, it’s not worth putting a penny towards the debt that you already owe.