Your financial advisor should not only be managing your assets and investments; your financial advisor also should be managing the money that you owe. In today’s world debt management is extremely important. Is your financial advisor doing his/her job for you and your family?
Money Coach warning: Please do not confuse a financial advisor who provides financial advice for a fee with a mutual fund salesman, an annuity salesman, or a life insurance salesman. Do not compare a financial advisor to a transaction broker who facilitates the purchase and sale of financial products. I recommend strongly that you do not purchase a financial product from anyone who makes a commission on the recommendation.
Your financial advisor (or yourself, if you act on your own behalf) should address the following areas of debt:
Credit card – Know well that if you cannot pay off your credit card debt at the end of the month, you are in financial trouble at this very moment. Immediate action is required to fix this problem. You need a plan and you need to take action to implement that plan.
Credit score – Your credit score is extremely important. It affects everything from the interest rate on your new home to your auto insurance premium. You must know the components of your credit score – the two most important of which are paying your bills on time and keeping your debt level low compared with the credit limit on the account. Your goal is a score of nothing less than 720 (FICO).
Your home – Your home is one of your largest assets and, in most cases, the place which holds your largest debt. Decisions must be made on whether to pay down that debt (only sometimes a good idea) or take on more debt (most often a bad idea, but there are exceptions).
Interest rates – Interest rates on your debt must be compared to interest rates on your savings. It makes little sense to have money in a CD earning 0.75% while you pay 4% on your Home Equity Line of Credit or 29% on your credit card.
Managing Credit – Common sense dictates that you don’t try to buy a car on credit between the time you applied for a home loan and the date you close on your mortgage. Every money move you make to manage your debt must take into consideration the pros and cons of that decision.
Just starting/no credit? – Does your financial advisor know how to create “non traditional” credit.
These are some of the areas that your financial advisor should be helping you with. Does he?
Other articles by this contributor.
How Can I Find Out My Credit Score for Free
The Only Two Things You Need to Know To Be Financially Successful
How To Get Out Of Debt, An Example