Should I do Credit Counseling? [Financial Fridays]

So I had lunch with a friend of mine the other day and he told me that he was doing Credit Counseling. I knew he had a job, was single and didn’t ever talk about being in financial stress so I asked him ‘why?’. He told me that he just wanted to to have 1 payment and not have to worry about it.

NOOOOOOOOOOOOOOOOOOOOOO!!!!!!!!!! I replied

He told me “yeah I should have asked you earlier”

He went on to tell me that the company he used hadn’t been making his payments on time (imagine that!) and that one of this credit card companies had jacked his rate up to 22% from 8%!

I told him to cancel that right away and he told me he already had and was able to talk to the Credit Card company and that they were able to revert him back to 8% (I was floored).

The thing about these debt consolidation/credit counseling services is that they do not treat the problem, only the symptoms. He got in to debt because he was laid off and out of work for 6 months. He had like $10k in credit card debt plus student loans and a car.

I told him his problem was not that he had to make so many payments, it was that he had the credit cards in the first place. I am a firm believer that they will get you nowhere and are too easy to pull from in an emergency. He was off work and I asked him that if he didn’t have the credit cards would he have been unemployed for so long and he admitted “No, I probably would have gotten a job doing SOMETHING”. Yeah he sat on his butt for a few months because he had a cushion. If the cushion wasn’t there his butt would have started hurting and he would have gotten a job a Starbucks or Wal-mart or Krogers doing SOMETHING.

My point is that yes you need emergency funds because things happen… but it needs to be cash and it needs to hurt when you use it. If he had spent 10k in CASH that he had in a savings account I guarentee you it would have hurt WAY MORE then 10k in credit card debt and he would have worked harder to get a J-O-B.