The Yo-Yo-Effect of Debt Reduction – Something Has to Change
March 15, 2009
by Lane Anderson
Have you worked hard to reduce your total debt balance only to find you are in a yo-yo pattern? Debts go up and down and each up exceeds the previous one, and over time your debt actually increases. To escape the debt yo-yo something must change.
Making the change, however, can be as challenging as losing weight. For example, I have lost about 500 pounds in my lifetime. Each time the scales tell me my weight is excessive, I set a goal for the pounds to lose, and select the diet. (Any diet gets results. Some diets appeal to me better than others.) My usual goal is somewhere between 20 and 30 pounds. Success! Now, the diet is replaced by my old lifestyle. Before I know it, the weight increases. I not only regain what I just lost, but I add a few extra pounds. Then, I start the cycle over again.
Debt habits follow the same pattern. The yo-yo-effect keeps an upward movement in debt balances over time. Significant debt reduction calls on solid efforts for a year or two, and balances respond downward. The good feelings of success trigger relaxing our efforts and old habits return. Debt balances again begin to increase.
How can debts move higher than the previous level? For one thing, when credit card companies see your regular payments reducing balances they will often increase you card limit or reduce the interest rate or both. Other credit card companies offer you a new card with special deals of one kind or another. Both of these approaches encourage you to increase your credit card debt; thus, the debt balances move upward.
The lesson I failed to learn from my yo-yo cycle in weight loss, which likewise applies to debt management, is to maintain a relatively level position, reduction must be accompanied by a maintenance program. This means developing new habits, not a return to old ones. Hence, you stop the yo-yo effect in managing your debt balances.
The pattern you want is simple enough. Many programs reduce debt. When you have reached your goal, establish personal policies and practices to maintain your new desirable level pattern. Escape the yo-yo!
About the Author
Lane Anderson, CPA advises individuals and couples first on reducing debt and, second, on implementing self-reliance principles and practices to manage debt effectively. To begin with, get his free copy of “5-Step Fast Start Plan to Debt Reduction” is available at http://www.debtreducingtips.com
Posted in Debt Reduction
Valery "Val" Mackie is an ordinary citizen of the United States of America (probably not unlike yourself). Her mission is to fix her credit report by January 3, 2009, while showing you how.
