As featured in The Wall Street Journal, Money Magazine, and more!

Getting Out of Debt: Reductionism and Holism

This article was written by in Best Of, Debt Reduction. 9 comments.

We’ve updated our list of the best online savings accounts, so if you haven’t checked in recently, take a look at the latest reviews and interest rates.

As a teenager I was fascinated by Douglas R. Hofstadter’s book, Gödel, Escher, Bach: and Eternal Golden Braid. The book explores set theory, computer programming, logic, philosophy, genetics, music, Zen, and art. Between each chapter are fun interludes. They take the form of scripted scenes featuring colorful characters like Achilles, Tortoise, and Crab. In most of these interludes, the characters discuss a concept such as recursion or a fugue while the script itself illustrates that same concept.

The book introduced me to the philosophical tug-of-war between reductionism and holism. Reductionism is the belief that an explanation of a system can be valid only if it focuses on the smallest elements of that system, whereas holism is essentially the opposite: the whole is greater than the sum of its parts, and the only way to explain a system is to look broadly, all but ignoring the components.

Reductionism and getting out of debt

The concept of reductionism can be used to help get out of debt. Debt itself is a mathematical concept. You are in debt because the balance of your assets is less than the amount of your liabilities. Each purchase worsens this condition, and if interest is involved, a $100 purchase could cost multiples of that amount in the long run. If never paid off, the true cost of any purchase approaches an infinite number of dollars.

Emotional spending is often, but not always, the cause of debt. Purchases are made without regard to financial condition, enabled by access to easy credit. Sometimes debt is caused by unexpected expenses without a cash cushion to cover surprises, and occasionally even the best emergency fund can’t save people from finding themselves in debt. Focusing on and eliminating the various root causes of debt, eliminating each, and evaluating your progress at every step are all reductionist approaches to getting out of debt.

The Expense Coffee-Related Drink Factor is a reductionist approach, as well. If you have a daily habit of excess, like drinking a $4 drink from a boutique coffee shop when it would cost $0.20 to make your own, eliminating this expense fits with the reductionist philosophy. A reductionist would also creating a specific plan for paying down debt once excess income is available, whether the plan is the Debt Snowball, Debt Avalanche, or something in between.

The reductionism approach, if followed faithfully and tailored specifically to unique circumstances, will engender success. However, this may be missing an important part of the debt reduction process.

Holism and getting out of debt

One might look at their financial situation with a holistic philosophy. Rather than focusing on the specific causes of debt and a predefined path for eliminating debt, it may be worthwhile to look beyond these details and at the total self. These are some questions that trigger holistic thinking and evaluation:

  • What kind of person am I?
  • What are the aspects of my self that define who I am?
  • What are my most important values?
  • Why have I not focused on sound financial management?
  • How would others benefit from my financial condition if it were stronger?
  • Am I satisfied with the balance of power between myself and those to whom I owe money?
  • Why do I feel I am not in control of my financial situation?

While these are all questions that are somewhat separated from the specific actions taken when dealing with money, the answers describe a character. The whole self provides insight that can help someone improve a financial situation and life. Holism and reductionism are by definition mutually exclusive, but that shouldn’t prevent someone from using aspects from both philosophies to increase the probability of financial success.

You could eliminate bad habits, cut up your credit cards, and pay off your debt, but if you haven’t evaluated your identity and your relationship with money, you are treating only symptoms. Likewise, if you redefine your values and begin to re-frame your locus of control without thinking about the consequences of your purchases, you may feel better about yourself but the financial damage will still exist.

Do you lean more towards holism or reductionism? Or are you just a fan of GEB:EGB?

Photo credit: psd

Updated February 27, 2010 and originally published December 9, 2009.

Email Email Print Print
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar 1 Anonymous

The irony is that getting INTO debt has made me a much stronger, more motivated person. Life was too easy just working and saving money. Going into debt gave work a bigger purpose, as now I knew I had something to pay off.

If I didn’t buy a piece of property 7 years ago, I really don’t think I would have been this focused in work. I probably wouldn’t have gone to grad school too, to try and further my career. 6-7 more years, the property is paid off, and it goes from debt funding, to 100% income giving since it’s a rental now.

I’m on a path of reductionism now, which I find very fun. Getting into debt could really be one of the best things that has ever happened to me!

Reply to this comment

avatar 2 Anonymous

Debt has never been a “character” issue here. I grew up in so much financial fear, I never went near that water.

I am, by default, a reductionist. But it’s tough to live in a world where others (my family) are not. If anything, I’ve learned from them not to be an irrational reductionist.

Reply to this comment

avatar 3 Anonymous

I follow the reductionism school when it comes to getting rid of my debt. I made a (too) detailed budget and tweaked it as time went on. I use the snowflaking method to pay off debts AND build up savings at the same time. I cut expenses where I could but still allocated some fun money so that I could have a blowout if I wanted to.

Reply to this comment

avatar 4 Anonymous

I’m a little bit of both. I am working to get rid of excess things in my life I don’t need, while trying to figure out how all the pieces work together. Very interesting article!

Reply to this comment

avatar 5 Anonymous

Now I’ve got another book to buy which goes against my reductionist ways, but the holistic side of me want to grow, learn and develop into a more knowledgeable and capable father and husband.

Thanks for providing the link to Amazon, just ordered it….

The reductionist side of me made me buy a used copy though!

Reply to this comment

avatar 6 Luke Landes

You’ll have to come back and let me know what you think of the book.

Reply to this comment

avatar 7 Anonymous

Thanks for the updated bank list!

Reply to this comment

avatar 8 Anonymous

I’m with Financial Samurai. Negative reinforcement seems to work better for me than positive reinforcement. Nothing motivates me more than calculating how much interest is going out the door every month.

That’s also probably why I always have a few pounds to lose. I’m most motivated when I look my worst. When I get down to my goal weight, I don’t stay there for long. I soon fall off the wagon. Feeling physically fit doesn’t motivate me as much as feeling terrible.

I realize this is a character flaw that needs work…but am not sure if it’s really changeable.

Reply to this comment

avatar 9 20andengaged

I’m most focused on seeing how fast I can get out of debt by seeing what I can cut out and put towards it.

Reply to this comment

Leave a Comment

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.