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Extract: The 5 emotional stages of debt

Determination, resolve and belief is what you need to overcome your debt problems, says financial expert Liam Croke who has some tips to help.

Liam Croke

IT IS WIDELY recognised that when you get into debt, you pass through various stages. How people go through each stage is very much up to them. However, no matter what stage you are at, or how you are dealing with it, the most important thing you have to do is to take action to resolve the difficulty you are in.

I can certainly help you with this, but you have to take action yourself and you have to be determined to take back control of your life. So what I need from you now is determination, resolve and belief that you are going to overcome your debt problems. Let’s look at the various stages people go through when they are faced with debts they cannot afford to repay, and how they react.

1. Denial

This is the first stage that people go through. Believe me, you don’t have to be in debt to be in this stage. I see it happen all the time, and hear comments such as ‘It won’t happen to me’ or ‘I will never get myself into that situation’ all the time. Deep down people know that they are on a slippery slope and that their situation is getting out of control, but they bury their heads in the sand and hope that the situation they find themselves in will miraculously improve.

I always tell people that they must understand the difference between facts and opinions, because, if they don’t, they end up doing insane things and begin to take risks that may take them years to recover from – or, worse still, which they may never recover from.

I firmly believe that denial is the reason for this. Listen to me when I tell you some facts: denial of your debts will make your situation much worse. If you think you have money problems, listen to your gut instinct because it’s right: you have problems. And if you think you have time on your side, you are sadly mistaken. You don’t: time is your enemy. You have to take action as fast as possible, because the more time you spend in denial, the worse your problem is going to become. You simply have to get past denial very quickly.

2. Anger

I have read many books and studied personal finance for many years. With all the research and reading I have done, I can confirm to you that the anger you are experiencing because of your money worries is an emotional waste of time. You are using up vital energy that should be directed at getting out of your money worries, not adding to them.

Sure, it is hard not to get angry, but where is this anger going to get you? One of my favourite pastimes is reading about, and watching old footage of, the Apollo missions to the Moon. I am fascinated by these astronauts, who really were made of the ‘right stuff ’ but I was listening in one video to Jim Lovell, who was commander of the Apollo 13 mission, speak about the time when a hole blew in their spaceship halfway to the moon. He was asked how he reacted.

Did he freak out? His answer was that they all remained very calm. He said that they could have bounced off the walls in the spaceship for twenty minutes in anger and despair, but that if they had done this, twenty minutes later there still would have been a hole in their spaceship, and what good what that have done them? They thought rationally: “what do we need to do to solve this problem?”

So, please apply the same principles to your financial problems. Do not keep telling yourself how much of a failure you are. Listen to me: everybody fails, it’s life. But you know what? You have got to learn from your failures and not repeat them ever again. Use them to your advantage, let them make you smarter, so that if there ever is a next time, you will use your experience to make much better decisions.

3. Depression

This is probably the worst of all the stages, and one that is very hard to control. Being in financial difficulty is not fun, and it does make us feel sad and depressed – no question about it. Not being able to repay your mortgage, not being able to find a new job, not being able to heat your home, having your home repossessed, having to give up your car for an old banger, or your partner having to go back to work are just some examples that may lead to depression. A good friend of mine lost his job about eighteen months ago.

The sector he had been successfully practising in for the last 20 years had collapsed, and it seemed that it would take at least a decade for it to recover. He quickly went into arrears, he couldn’t get another job, he didn’t want to retrain and try to reinvent himself, and he very quickly became quite depressed.

He was a failure, in his own mind, to his wife and children and he just could not lift his head up from his pillow every day. Up to that point, he had been a very outgoing, extrovert type of person who would get on with anyone he met and was liked by everyone who came into contact with him, but now a cloud hung over him and he was not the same person I had known before. What made things more difficult for him was that he would not meet any of his friends because of his perceived failure. He didn’t want contact with anyone and certainly didn’t want any help, either.

Then one day, his wife noticed a small mark on the side of his face – a very small discolouring that she wanted him to get checked out. A week or two passed, and his wife, who had saved the €60, convinced him to go to his GP. Her actions saved his life because the ‘spot’ on the side of his face was in fact cancerous and needed immediate surgery and treatment. He had this carried out, and now he is in fine health, fully recovered.

The reason I am telling you this story is that there is a lesson to be learned: no matter how bad the situation feels, it could be worse. Even in the dark times, there are still things to be thankful for if you can try and find that rainbow rather than stare down the well .

4. Acceptance

This is the stage in your debt life-cycle where you come to terms with your problems. You are still in debt – that hasn’t gone away – but you finally realise that you may not ever earn as much as you used to. Yes, you are in negative equity, and struggling to make your mortgage repayments, but hey, you are not the only one and you know, sh*t happens! The great thing about this stage is that you see a way out of your problems. Your exit from them may not happen overnight, but for the first time in quite a while you see your situation with great clarity and you know it is not going to be never-ending because you are going to do something about it, right? Yes, you are, and this is why you are reading this, right? Right.

5. New Beginning

Your life will move on, and perhaps in months or maybe even years, you will start to take back control of your financial life and will begin to notice the difference.You will have started saving again each month, you follow your spending plan each month, and one or two debts are paid off in full. Things begin to improve at work and your life begins to return to what you believe is normal. No more worries about paying the bills and no more jumping when the phone rings because you think it is the credit card company again. This is all going to happen to you, believe me, and if you follow what I am going to show you, and make some simple and at times very hard changes to your life, I guarantee that it will. Say it again: I am going to be debt-free.

Liam Croke is a qualified financial advisor who has worked in the financial services sector for the past twenty years. This article is an extract from his new book, I Am Going to be Debt Free, which published by Liberties Press and is out now.

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Liam Croke

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