One Cure For Debt Addiction


If you want one alternative cure for debt addiction that emanates from overspending, create new heuristics

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Question: “It is like I am on a Ferris wheel. I rack up considerable debt. Then I exert all efforts to save so that I can fully pay down my debt and be rid of it once and for all. But before I even come close to zeroing out my balances, I find myself racking up debt once more. How can I break this cycle?” — asked at “Ask a friend, ask Efren” free service available at and Facebook.

Answer: In previous articles, I discussed how to lighten the debt burden through one or a combination of the following: refinancing, restructuring and condonation. But please note that these are mere lifesavers or to put it mildly, “band-aid” solutions. The root cause of the debt problem still needs to be addressed.

Financial planners will typically get their clients to do some soul searching to uncover the root causes of debt addiction.

And since debt is more often than not a direct result of overspending, financial planners will ask their clients to review the beliefs, logic and values that they bank on. While this is one potent route to take, it requires a lot of energy to internalize.

Behavioral economists offer a simpler preventive solution to debt addiction and it is based on the biological drivers of people’s actions.

Scientists have long held the belief that the human brain is comprised of two parts, the primitive and the advanced parts. The frontal cortex, which is associated with the area of the brain that asserts willpower, only developed in the last 200,000 years. And it is the more primitive areas of the brain that are initially active to help the brain perceive the complex world around it. The simple reason why the primitive areas of the brain are used is that these rely heavily on heuristics, nothing more than rules of thumb, educated guesses, intuitive judgments and plain common sense. Not much energy, in form of glucose, is burned when applying heuristics.

In a sense, heuristics are the body’s simple protection mechanism to keep the brain from consuming too much glucose at the expense of other parts.

Heuristics are great as they speed up our interpretation of reality. When you hear a car pull up in front of your house, you spring into action hoping that would be your daughter or son coming home late at night from a date. Guess what though; retailers study these heuristics very well to come up with strategies and tactics to get their target customers to buy more of their products and services.

For example, higher end restaurants would ask a patron to wait to be seated even when there is one vacant table right in front that is perfect for his party.

Restaurants want lines to form outside to give the impression that many customers are eager to dine there.

The brain’s primitive area also does not like numbers. When numbers are presented, the brain goes into near shutdown mode and applies the simplest rules in its arsenal to understand them. That is why zero is the most powerful number in consumer finance.

So if you want one alternative cure for debt addiction that emanates from overspending, create new heuristics.
If there is a line at a restaurant and there’s hardly anyone inside, tell yourself that either it is still early or the restaurant is desperate (even if it is not).

When you are in line at the supermarket cashier, take out your smartphone and browse the internet for news and not the aisles for products.

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Efren Ll. Cruz is a Registered Financial Planner of RFP Philippines. He is best selling book author of Pwede Na! (A Complete Guide to Personal Finance) in 2004, and is the chairman and president of the Personal Finance Advisers Philippines Corporation.




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