The Truth About Debt Consolidation Programs

"Owe no one anything, except to love each other, for the one who loves another has fulfilled the law. " - Romans 13:8

"Do not be among those who give pledges, among those who become sureties for debts. If you have nothing with which to pay, why should he take your bed from under you?" - Proverbs 22:26-27

One of the biggest challenges individuals and families at every economic level have is living “within their means”. In the United States, more than 40% of families spend more than they earn. Credit card debt continues to be a major stumbling block for many individuals and families. Also, the number of personal bankruptcy filings has increased by more than 200% during the past ten years. [Keown, Arthur. (2004). Personal Finance. NJ: Prentice Hall]

It is amazing how families can go on in life, spending more than what they earn. Mathematically it does not add up. However, for a country that has shifted its focus from a producing/manufacturing country to a consumer country we needed to find a way to break the basic accounting formula of 1 + 1 = 2 and Assets - Liabilities = Equity. The solution, facilitate consumer credit and relax the requirements that were needed to qualify for such credit. Now even teens are provided with credit cards, the more the merrier! See by facilitating the access to credit cards, our impulses to purchases something are no longer controlled by the fact that there is no money in the bank account to cover such expenditure, now we just charge it and we worry about the payments later. You go back to jobs that many times people go just for the paychecks so they can go and pay their consumer debt. The process continues in a never ending circle. This way they keep us like hamsters running in the hamster wheel; The birth of a consumerist society.

During one of my readings on the subject of consumerism and debt slavery, I came across of a blog by Stiff Kitten written in May 2010 "Consumerism - enough is enough". I will share a short synopsis about it:

"There are true needs and false needs – but only false needs need to be manufactured and nurtured. Indeed, today’s consumerist society has more or less turned Maslow’s hierarchy on its head. According to Maslow, people should be satisfied when they reach the top of his pyramid-shaped hierarchy of needs, but in modern consumerist culture and society there can be no satisfaction of needs. Consumerist society never satisfies, indeed it is meant not to do so, as any form of satisfaction is an enemy of the consumerist, capitalist society – a society that requires the persistent buying of things we don’t need for its continued existence – what is usually referred to as “growth”."["Consumerism - enough is enough". Stiff Kitten's blog. May 9, 2010. Retrieved February 15, 2012.]

This buying trend is influenced by the saturation of advertising; new offerings from banks (loans and credit); the false perception of immediate gratification; and the false illusion of achieving a better life by buying more and bigger things that we do not need with money we do not have.

The U.S. has 5% of the world's population but uses 50% of the world's resources and creates 30% of the world's waste. The average American consumes 50% more than they did only 50 years ago and, according to author Annie Leonard, 99% of the items bought by consumers are no longer in use after only six months. This type of behaviour is financially and environmentally irresponsible and unsustainable, which is bound to cause havoc in our homes and society.

Now, what all of this has to do with debt consolidation programs. Everything as I will address shortly.

Debt consolidation programs do not address the root of the problem. It is just a band-aid on a blood gushing wound. Many families are lured into this programs as the "easy way out" of the problem and they will soon realise that it is not. True debt management and reduction requires work and discipline. Debt consolidation by itself does not reduce your debt nor addresses the problem, so even if you succeed and pay off your debt, unless you make a change in your behaviour regarding debt you will end up in the same problem shortly.

The solution for true debt reduction is taking responsibility and not by looking for the "easy way out". You need to be willing to work and sacrifice in order to fix the situations that you created with your own irresponsibility. If you are not willing, then you cannot be helped. You must address the behaviour that got you into the mess.