Sometimes it makes more sense to pay off your liabilities than to invest your money. We’ll perform a debt analysis and recommend the most prudent approach for your situation. This includes an evaluation of your loans and other debts. Plus, we’ll guide you on the best way to structure future purchases.
Planning for a Budget
Managing your debt is a key component of how we can help you plan for and create a healthy financial future. A person overwhelmed with debt is like a person bleeding from an open wound — the first step is to stop the bleeding. Will can map out your cash flow and identify existing and potential problem areas.
We ask that you bring all relevant documents to the meeting to ensure that we can get the full picture of debt situation. This includes bank statements, credit card bills, installment loan statements, pay stubs, tax returns for the past few years and anything else that may have an impact on your financial situation.
Once we review your debt load, we will draft a new balanced budget that covers the essentials while not adding more debt to the pile. This typically involves trimming off any unnecessary expenses, so that any excess funds are available to pay down existing debt and perhaps put something away for savings or investment.
Analyzing and Restructuring Debts
There are many different types of debt. Some are relatively benign, such as mortgages and student loans (low interest rates and tax advantages), while others are downright toxic, such as credit cards and personal loans with high interest rates and penalty fees for deliquency.
We will evaluate your situation and take a look at the options for restructuring debt into more beneficial options and prioritize a payback strategy. For example, if you are a homeowner with equity in your property, you may be able to take out a home equity loan or a second mortgage, at a lower interest rate than your credit cards to pay off your debt in one lump sum.
An added benefit of getting your debt under control is that your credit score suffers every month that you have a high-balance or delinquent accounts. As the new budget takes effect, the accounts become current and the balances gradually sink. Your credit score increases accordingly, which opens the door to renegotiated terms with creditors (at lower interest rates) and may even lower seemingly unrelated things, such as insurance premiums.
Creating a Long Term Plan
Sometimes the goal is not always to pay off all your debt as soon as possible. For example, if you have dependents, it may make more sense to opt into a life insurance policy, to safeguard your family in case of premature death. In these circumstances we may recommend paying down large high interest debts, then making smaller debt payments so you can pay into an insurance policy.
We understand that everyone has a unique situation. It is our job to take a holistic view of your finances so that we can create a long term plan that is right for your specific needs. Included in your written plan will be a recommended course of action, along with action steps and milestones to check off as you progress. We will also provide possible red flags to be aware of, to help you steer away from potential missteps that could derail your plan.