Unless your client lives in South Carolina and held the winning Mega Millions ticket, they are probably in debt. The average American has about $ 38,000 in personal debt, not counting mortgages. (1) You advise them, you scare them, you try to reason with them. If anything, the problem gets worse. They are probably carrying a bit more weight than they should, too.
Americans are Indebted. Are They Overweight Too?
Many of us eat too much. According to NBC News, 70.7% of Americans are overweight or obese. (2) According to Time magazine, reporting on a Cosmopolitan magazine article, only 28% of men and 26% of women are extremely satisfied with their appearance. This implies 72% and 74% respectively are unhappy. It’s probably weight related. Although losing weight is a popular New Year’s resolution, about 80% of people break their resolutions after six weeks. (3)
What’s the Similarity?
Here are some easy to understand analogies for weight loss and debt reduction:
- Both are easy to add on yet difficult to shed.
- Both seem to increase even when you aren’t doing anything.
- Most people’s lifestyles put them at a distinct disadvantage.
- Left untreated, both can cause problems later in life.
- People with this problem find it easy to find kindred souls with the same problem.
- People tell you having some is not a bad idea. Debt establishes a credit rating. Extra weight makes your face look fuller.
- You can stabilize at a debt level, not increasing it. In weight loss it’s plateauing. It’s difficult making progress beyond that point.
- Debt consolidation programs are probably the financial equivalent of liposuction. You can dramatically eliminate the problem, but many people wind up putting the weight or debt back on, all over again.
- In times of stress we eat. In times of stress we spend.
How Do You Treat the Debt Problem?
Put on your financial planning hat. Once you get a client to see the similarity, you can get them motivated to solve the debt problem.
- Set realistic goals. In weight loss, you should have better luck losing a pound a week vs. trying to crash diet to fit into a certain dress for a wedding you will be attending. Your credit card bill should include a chart showing how making the minimum payment (and not spending more) will pay the bill off in 38 years, while making the larger suggested payment will pay the bill off in three years.
- Change your lifestyle. You go drinking with your friends on Friday nights. Lots of beers get consumed with the gang while watching football on TV. It’s tough to not drink, so your weight goes up and up. If your primary leisure time activity is shopping with friends, you will continue spending money. See the same friends under different circumstances, like board game night at someone’s home. Get some new friends, people who work out at the gym or go running. Neither involves eating, drinking or impulse spending.
- Pay yourself first. People who diet often exercise. It burns calories, which helps you lose weight. You are investing in yourself. That same strategy transfers over to debt reduction. Paying down high interest debt should be the first bill you pay, not the last line on your monthly budget. Paying down debt is like burning off calories.
- Alter your routine. If you buy a donut and a Frappuccino every day from the coffee bar on the way to work, change your route so you don’t pass the coffee bar. For the debt reduction equivalent, pay for purchases with cash or a credit card like American Express that requires the balance be paid in full every month.
- Avoid temptation. It’s easier said than done. Some menus list calories, which gets you thinking. In debt reduction terms, carry only one credit card. Leave the others at home. Toss out those solicitations you receive in the mail for additional credit cards.
- Write it down. It’s a form of accountability. When you record everything you eat on a notepad, you are conscious of when and why. When you record what you spent and review it daily or weekly, you quickly differentiate between wasteful spending and money well spent.
- People who diet might have one large meal in the middle of the day and two lighter meals. People with multiple high interest credit cards (three square meals) might transfer balances to the card with the lowest APR and a low or no interest promotion for cash balances. The dieter is saving calories, the debtor is paying less interest.
- Restrain yourself. The dieter might have dessert served to them at a wedding, but they take only one bite, then put the fork down. The weekend shopper might see an item they like, but then leave the store, do something else and then determine if they will return to buy the item. Often the answer is no.
- Some diets keep you on a strict regime six days a week, then allow a holiday. Often the dieter is so pleased with their progress, they restrain themselves on the seventh day. The person seeking to reduce their debt might give themselves a weekly allowance in cash. It’s walking around money. They can spend it as they choose, but they can’t charge drinks and meals to a credit card.
- Get a buddy. People who work out in a gym often have a partner. People in Alcoholics Anonymous have a sponsor. You want to have several friends who share the same lifestyle. Hanging out with them allows you to have a good time without falling into bad habits.
Getting in shape. Everyone likes the end result, but no one looks forward to the effort involved in accomplishing the goal. It’s the same with debt reduction. If your client can understand the first, they should understand the second concept.
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