3 Ways You Can Help Clients Pay Off Debt Faster
Most people do not have the financial discipline or the tools to achieve their goals and end up spending a significant amount of money over their lives on debt that should, instead, go toward building their future. Here are three key ways you can help your clients pay off their debt faster:
#1: Show them where they really stand with their personal debt situation – shock treatment. Don’t just show the client how much they owe today on all of their debts; show them how much it will cost to actually pay off their debts. We know that if you have a credit card balance of $10,000, that doesn’t mean you will pay $10,000 to get out of that debt. In fact, when paying minimum balances only, the debtor could pay up to double or triple that over the life of that debt.
Teach them this quick tip: Pay off the lowest debt, first, and once that is paid off, take that money that was going to that card and add it to the next lowest debt. With a simple plan like this, you will be showing them how pay off their debt much faster than their current course. And, with some simple analysis, you can show them alternatives that will save them money and time, and helps them significantly add to their retirement savings. How do you benefit? Your counsel and guidance ultimately creates customer loyalty and locks them into you and your services.
#2: Get them to stop using the credit cards except for emergencies (explain that going to the movies and dinner is not an emergency) and have them start tracking their spending. Clients are typically not doing a good job of monitoring their spending, if they are doing it at all. Make sure they have a clear, written plan to get them to understand the importance of getting and staying out of debt, and that they can really achieve the goal of becoming debt free.
#3: Get buy in. You can’t take prisoners. If they really want it, they can get it. It is much like a diet or workout plan; they have to have guidance. It is difficult to figure it out on their own and they need a plan in order to stay on track.
BONUS TIP: Refinancing a home to pay off that debt just extends that debt out 15 to 30 years. Who wants to pay for a Saturday night out or a vacation for decades? The thinking needs to change. There are better alternatives.