5 Avoidable Obstacles on the Road to Financial Recovery

Once again at work, I heard a troubling description of one of my co-workers problems with debt. This poor soul has over $80,000 in credit card debt, does not own any property, and is in his mid-fifties. Although it was painful to hear his story, the pragmatic part of my brain kept on telling me that his mindset about his debt probably led him into this abyss and will probably prevent him from recovering. Below, I have identified five avoidable barriers that prevent people from solving their financial problems.

1. You believe that the situation is hopeless. There is always something you can do to make your financial situation better–even if you are attacking your debt one dollar at a time. In addition, you have to start somewhere and often the first step will be the most difficult step. One of the few things that I remember from my college studies is the Locus of Control Continuum. On one end of the spectrum is where people with External Locus of Control live. These people believe that their behavior is guided by fate, luck, or other external circumstances. On the opposite side of the spectrum is where people with Internal Locus of Control live. These people believe that their behavior is guided by their own personal decisions and efforts. I would suggest that we all need to be reminded (maybe even tazered or cattle prodded) into living more closely to the internal locus of control end and start reclaiming control of our own financial lives.

2. You have not accepted that you have a serious problem.–You believe that you have your debt problem under control or that it is not a big deal. Let’s face it, no one wants to admit that they have made mistakes and have suffered financial failures. Still, acceptance is a much better stage to be in . After all, you are unlikely to change your behaviors if you do not recognize that something needs to be fixed. However, don’t forget that accepting that you have a problem does not equate to accepting defeat!! If it makes you feel better, you can take comfort in the fact that you are certainly not alone in experiencing problems with debt.

3. You rely on one source of information for advice. “My uncle told me I was better off filing for bankruptcy” or “My friend works for a credit card company and said as long as I pay every other month, my account won’t go into collections” Even if your uncle/friend is Warren Buffett or Dave Ramsey, you should always look for a second (or third or fourth) opinion. Force yourself to read an opposing opinion–play devil’s advocate. There are very few absolute solutions out there that fit everyone’s individual situation, so do a little research to find the best advice.

4. You believe that no one will help you. Don’t try to avoid all those calls from creditors. Instead, you should be calling them and explaining your situation. It is in their best interests that you don’t default, so they will be open to negotiations and might even give you some good advice on how to maneuver through all the red-tape. Yes, it will be hard to swallow your pride and discuss your situation with strangers, but a couple of calls could easily save you thousands in interest and late fees.

5. You don’t think you need to produce a monthly budget on an actual piece of paper or spreedsheet. I saved the most important obstacle for last. You will never succeed in reducing your financial problems if you don’t make write down a practical plan and budget. No one is above doing this!! Invest the time to write down where all your money is going to and how much you are throwing away paying interest each month. It will open your eyes. I would suggest figuring out how much you paid in interest last year, and break that down to the month, day, and hour. Using the example of my co-worker, we figured out he pays close to $1.75/hour (24 hours a day) in interest.