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Spending Addiction + Denial = Unmanageable Debt

We often talk about problem drinkers as being in “denial” of their problem. A fundamental step taken by those that are dealing with alcoholism is to accept that they are an alcoholic, and in ending the denial, they can successfully begin rebuilding their life from a sound base.
But what about someone who has an addiction to spending and subsequently abuses credit? Well, in trying to address America’s burgeoning consumer debt ($2.5 trillion not including mortgages), we can view this addiction in a similar fashion.

For the record, at last count Americans had racked up approximately $800 billion in credit card debt or approximately $5,000 per cardholder. The delinquency rate is at a 16 year low around 3.5%, which suggests we are getting better at managing credit card spending in the wake of the recession. But even though most Americans are heeding the lessons of recent years, why is there still a section of the community that continually abuses credit and spends more than they can afford?

There have been many studies of social and demographic factors as they relate to credit card debt and, for example, it is generally accepted that people find it harder to manage credit card spending as they don’t feel like they’re spending “real money”. On top of this, there are hundreds of websites, magazines and self-help books that offer advice for managing of credit card spending. However as good as these studies and advice are, many of their benefits are limited as they are addressing symptoms and not the cause, which lies much deeper in human nature.

To me, the saying the materialism is a poor substitute for happiness holds a lot of merit. Researchers have found that people with low self esteem are more likely to engage in impulse spending or “retail therapy” and therefore more likely to spend above their means. Ego and the need to justify self worth (or lack of) are a powerful driver in human nature and it is a dysfunctional connection between money and people’s ego’s or self worth that is often at the root of unmanageable credit card debt. Basically if you need to spend money to generate positive feelings then chances are you will spend beyond your means – unless of course you’re Mark Zuckerberg.

Those that are struggling with credit card debt may need to face some hard facts. It may be that certain economic factors beyond their control have conspired against them, but it may also be that they are in denial of a greater psychological problem that is adversely affecting their spending habits. Just like an alcoholic they may need to confront some deeper issues, but once they can break the cycle of denial they can begin to adopt simple practical measures and successfully build their way out of debt.

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