Dave Ramsey: Debt Consolidation Doesn’t Fix Spending Habits | New
Dear Dave: Is debt consolidation a good way to get out of debt?
Dear Erika: No it is not. Debt consolidation companies try to position themselves this way, but they don’t even come close to addressing or solving the real problem.
Here’s the main reason debt consolidation isn’t a good idea: It makes you feel like you’ve really done something to change your financial outlook when you haven’t. When you move things around or suddenly have a lower payment each month, you end up thinking you’re making real progress.
The point is, you haven’t done anything to fix the real problem – which is you.
I meet people and talk to people all the time on my radio show who don’t quite understand that. They will tell me that they have paid off all their debts by using a debt consolidation company or by taking out a second mortgage on their house. Well, the truth is that they are not debt free. They have done nothing but pay off the same old debt.
Personal finance is 80% behavioral, Erikah. When it comes to getting out of debt, staying out of debt, and getting your finances in order, you have to change your habits and behaviors with money. Interest rates aren’t the issue, and the number of payments you face isn’t the issue. The problem is the person you see in the mirror every morning.
Until you change that person, start living with a strict, written monthly budget, and decide to eliminate debt from your life once and for all, you’ll never make any real progress in taking control. of your money.
David Ramsey is a seven-time #1 national bestselling author, personal finance expert, and host of “The Ramsey Show.”