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Feeling stuck. It might be the most frustrating of all human experiences. Stuck under a glass ceiling, stuck in a relationship, stuck in a creative rut, stuck in your career, stuck in debt. We all get stuck, and we all hate it. It’s human nature to feel like you want to believe whatever you are doing is “going someplace,” whether it’s a love affair or a career or a bank account.

Dr. Hugh Thompson and I have spent many years studying the problem of getting stuck. It’s more universal than you might think. We learned that however bad it feels, getting stuck is a perfectly natural part of the human experience. In fact, getting stuck is written into the very code of life itself. Known also by its more scientific name of The Plateau Effect, getting stuck is written into our laws of biology, physics and chemistry. Our new book, Getting Unstuck: Breaking Free of The Plateau Effect, describes the new science of breaking barriers. We place the reasons for getting stuck into eight categories, then offer antidotes for these causes. The eight causes are: the Greedy Algorithm, Immunity, Flow Issues, Distraction, Data Idolatry, Timing, Failing Slowly, Perfectionism.

In the this exclusive series for Credit.com, I am going to show how The Plateau Effect directly impacts your money, how these eight causes keep you financially stuck, and most important, how you can break free from debt and other shackles that hold you back. Today I will start with the Greedy Algorithm, which also allows me to show you how The Plateau Effect works, why it’s so insidious and why it’s so powerful to understand.

The Greedy Algorithm

I’m going to start right here by saying something controversial. Debt isn’t bad. In fact, paying down your debt can be a big mistake, born of the Greedy Algorithm. Now, let’s back up and tell you what this is.

All our concepts are borrowed from math and science, and the Greedy Algorithm is lifted right from higher math textbooks. Formally, it means that systems (and people) will always opt for the locally optimal solution over the globally optimal solution. Practically, it means people pick short-term gains over long-term gains all the time.  If you’ve ever grown impatient waiting for a bus and instead started walking to your destination only to have a bus pass you 10 minutes later, you have fallen prey to the Greedy Algorithm. Sure, it feels good to start walking, but long-term, you’ll be both exhausted and late when you arrive at your destination.

In fact, sometimes it’s better to walk backwards, away from your final destination. That’s called retrograde progress. How can that be true? If the subway is two blocks behind you, and it’s rush hour in New York City.

Here’s how the Greedy Algorithm works in your financial life.  Maybe you’ve heard that debt is the devil, and you should pay off all your debts as quickly as possible. That’s wrong. That’s picking a short-term gain over a long-term gain, and I’ll show you why in a moment, but first, let me explain one of the overriding principles of The Plateau Effect:

Everything works, until it stops working. Whatever you try to do in life – learning piano, speaking a foreign language, starting a business – will hit a plateau. Whatever you did to succeed will eventually fail. The only thing constant about life is change, and that’s why plateaus are so vexing. People succeed and then they start succeeding less and less, while working more and more. And they tell themselves: “But this worked before! It has to work!” So they try even harder, and that fails, too. Anyone who has ever tried to lose weight knows this principle: every diet/exercise plan works at first, and then seems to stop working. Hopefully, I will prove this concept to you in the next segment on Immunity. But if you can set aside your skepticism for just a moment, you’ll see why this is important in any discussion about debt.

Paying down debt is a very good idea, until it isn’t any more. Life is full of such plateau-born paradoxes, and they can only be solved with appreciation for balance and subtlety you learn while studying The Plateau Effect. Now, to the numbers (Hugh and I are mathematicians, after all).

Money is a zero-sum game. Spend it, and you no longer have it. So every dollar you spend paying down debt is a dollar you don’t save. BOTH saving and paying down debt are important. They should be done simultaneously, in a carefully considered balance. Don’t get greedy and go for the short-term payoff. Think long-term. Surprise: The younger you are, the more important it is to save, even at the expense of paying down debt. Here’s an example:

Say you are 25 years old and are carrying a $1,000 balance on a credit card at 15% interest, and you get a $1,000 bonus at work. Which is better, paying off the credit card or saving the money and paying off the debt slowly during the next year? The instant payoff of paying down a 15% interest credit card balance is obvious (it would save you roughly $100 in interest payments, assuming you paid the card down throughout the year). But in the long run, $1,000 saved in an IRA for 30 years will be worth $10,935 (assuming an 8% annual return). The $100 savings on interest payments at age 25 is worth $830 by age 55. So, which is greater, $10,935 or $830? When you are thinking about money, tell the Greedy Algorithm to shove it.

Of course, there are more obvious ways that people pick short-term over long-term gains. They invest in risky stocks instead of steady index mutual funds. They buy real estate hoping for a quick buck rather than carefully saving cash. But the Greedy Algorithm shows that even too much of a good thing – paying down debt – can be a bad thing when it comes to money. Now, why is that? Because over time, we grow numb to things, a quality that we called “Immunity.” That will be the subject of Part 2.

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