THE INSANITY PRINCIPLE

Do you know the definition of insanity? One popular definition is "Doing the same thing over and over and expecting a different result"

Yet so many people do exactly this, especially in relation to their finances.

I see so many people who tell me a similar tale as we go through their financial history. Typically there is a consolidating loan, now these sort of loan aren't necessarily a bad idea. I will cover how to best use credit in a later article. However I see them used in the worst way possible so often. Here is the scenario........

Bob has 3 credit cards, they are all up to the limit, a total of £7500 and he is paying out £150 a month minimum payments . He sees a great shiny new loan that will wipe out all of his credit cards and will reduce the monthly payments to £65 a month. WOW, nearly £100 a month better off.

As Bob pays off his final credit card with the loan money he says to himself "that's it I am not using credit cards again I am going to rip them up"

So far so good and probably sound advice, the interest rate on the loan will probably be a lot cheaper and the loan will be paid off.

However the reality that I so often see is this - Bob almost pays off his credit cards but leaves £350 on one so that he has £350 of the loan money to 'treat himself' after all he deserves it for being so financially sensible.

He cuts up 2 of his cards but leaves one 'for emergencies'

3 months later he sees a new shirt that he has to have and because he has done so well he decides he will 'reward himself' and given that all of his other shirts are in the wash it probably classes as an emergency anyway. So he dusts his only credit card off and buys it on credit........

18 months later Bob is asking if he can increase the consolidating loan to £10,000 because he wants to 're-consolidate'. He increases the payment period by 5 years so now he has an extra £2,500 credit BUT his payments have gone down!!! Now that is a financial magic trick and Bob buys himself a real treat for that!

All joking apart this is a typical scenario for a lot of people.

The reason is that they are following a pattern that has been programmed into them since childhood.

We all see money differently and for a lot of people their upbringing has planted seeds that mean they will be programmed to see credit as a way of rewarding themselves, or cheering themselves up.

In the worst case scenarios I have seen it is an addiction, no different to alcohol, drugs or food.

The good news is that it can be solved. Just as your mind has been programmed over time so it can be reprogrammed.

In an online training programme I use you can establish what patterns you have; how you think of money; where the thought pattern came from and then we can work to establish a better, healthier pattern which is often the first step to wealth.

If you want to learn how to stop banging your head against a brick wall contact me at steve@ukwealthcoach.com