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Are You Solving the Right Problem?

I have run into the fascinating topic over many years of working at High Tech companies and with technology issues. Often (usually in hindsight), my team has realized they were solving the wrong problem.  It’s easy to get too close to a problem and to lose perspective on the real problem you are trying to solve, and it happens more times than you think.

Here are a few problems that I have run into over the years (financially) where someone came up with great solutions, but at the end of it, they were solving the wrong problem:

  1. Credit Card interest rate is too high, so find a credit card with a lower interest rate and transfer your balance over to have to have your debt grow slower (i.e. lower interest rate).
  2. Figure out that your overdraft protection interest rate is actually higher than a pay-day loan, so you get those instead.
  3. It is cheaper to get your car financed through the car dealership than it is through your bank, thus saving lots in interest paid.
  4. You have a high debt load of credit cards and such, so you get a consolidation loan, but you don’t destroy your credit cards.

Can you guess what the real issues were in these situations?

In case (1), why not pay off your credit card, find a way to pay it off, or better still, don’t build up debt on your Credit Card is the real problem. Your solution is better than nothing, but you aren’t solving the problem, especially if you keep using your credit card.

Seriously, do you think getting a pay-day loan is a better idea for case (2)? Stopover drafting and never get a pay-day loan is a much better solution.

Why not make a sizeable down payment for your case in case (3) or better still pay cash for a used car that you can afford?

As for (4), consolidation loans can save folks financially, but if you don’t change your lifestyle and continue to build up debt, you will keep getting consolidation loans and create a bigger problem later.

Solve the right solution. Did I miss any other “solving the wrong issue” problems?

Feel Free to Comment

  1. I totally agree with your 3rd point.
    Much cheaper to finance through the dealer than your bank. In my case it was almost 4% cheaper.

    Good post btw!

  2. Good point BCM. It is like trying to fix a broken arm with a bandaid. It is far better to get to the root of the problem rather than trying to minimize the damage later. You need to develop solid financial habits and not just figure out how to pay less on those mistakes.

    I ran into this kind of stuff in my IT work too. We’d spend countless hours trying to address some website feature only to later realize that the whole thing could be avoided with a simpler approach.

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