Get Control Of The Man In The Mirror

Mitchell wonders what Dave thinks about taking out a home equity line of credit at a lower interest rate to pay off some debt.

QUESTION: Mitchell in Tennessee from My Total Money Makeover wonders what Dave thinks about taking out a home equity line of credit at a lower interest rate to pay off some debt. Dave says he doesn't recommend it unless you're facing a bankruptcy.

ANSWER: I don't recommend it unless it's to avoid a bankruptcy. One reason is we've all experienced that real estate doesn't always go up, and people get caught in these situations. There aren't many people asking that question anymore because they don't have the equity in their homes to take out that home equity line of credit. The reason I don't is this: Personal finance is about 80% bhavior. It's only about 20% had knowledge. The problem with my money—the problem with your money—is not mathematics. The problem is the idiot I shave with every morning. If I can get that guy to behave, he can be skinny and rich. You've just got to think differently. We need to modify behavior more than we need to modify mathematics.

Your interest on your credit cards is not the problem; it's your lack of a budget. It's a lack of organization, lack of ability in your family to sacrifice and live on less than you make. That's the problem. You fix that, and you'll get out of credit card debt pretty quick regardless of the interest rate. Most people that do a debt consolidation loan end up back in credit card debt. Now, they've got twice as much debt. Why? Because they didn't change the habits. They tried to fix the symptom rather than the problem. Your crummy money habits are your problem. I would not take out a home equity line of credit even though mathematically it makes sense. Instead, I would roll up my sleeves, get intense, get on the debt snowball, go absolutely bananas, go crazy focusing on this. With you just knocking it out like crazy, it changes everything.