Paying off debt may not be easy but, it is doable when you have a plan. One can create a plan all by himself or he could hire a financial advisor to help get out of debt. Without a solid plan, getting out of debt is impossible for anyone whatever the amount of money that they owe. There are many strategies available out there that can help in building a plan to follow until the debt is totally paid off but, they can be overwhelming. When creating a course of action is a struggle to an individual with debt, getting the service of a financial advisor will be an ideal option.
This article will be discussing these topics that concern people who are planning to get help from a financial advisor.
- Signs to seek financial advice from the experts,
- Kinds of a financial advisor,
- Benefits of hiring a financial advisor to help get out of debt,
- Types of financial advisors, and
- Financial advisor payment.
10 Signs to Seek Financial Advice from the Experts
It’s easy for people to turn their backs on their debts when they cannot keep up with the payment anymore. But this is one problem that can’t be ignored for long as being in debt brings the following disadvantages:
- A low credit score will create a bad impression on future employers when applying for a job.
- A waste of money paying for high interests and penalty fees.
- Non-approval of loans due to the high debt-to-income ratio which makes a person a high-risk borrower.
- No savings for emergencies and retirement.
When people deep into debt recognize that debt repayment is the only way they could take back control of their lives and achieve financial freedom, they would immediately act on it before things got worse for them.
So how does one determine that it’s time to approach a financial advisor to help get out of debt?
They have encountered these 10 signs.
- They only pay the monthly minimum payment on their credit cards.
- They don’t have an emergency fund.
- They lie to family or friends about their debt situation.
- They continue using their credit cards while attempting to pay what they owe.
- They are sometimes late in paying their bills and other expenses.
- Their credit card is nearly maxed out or they have exceeded their credit limit.
- They don’t know exactly the total debt they already have.
- Their accounts are overdrawn or they have bounced checks.
- They make cash advances from their credit cards in order to pay other bills.
- Lenders denied their credit application.
All of these signs are red flags to a financial disaster that must be addressed timely and in the right way. When these happen, getting financial advice from a financial advisor to help get out of debt is one of the many methods people used. But it’s a tricky job to look for a financial advisor. There are two kinds of financial advisors: the financial counselor and the financial planner. One must know the difference between the two to know who is the one he needs and how much will it cost him to get the financial advice that he needs.
Difference Between A Financial Counselor and A Financial Planner
A financial counselor differs from a financial planner in terms of the people they cater to. In general, a financial counselor usually serves people with lower incomes. He can help them remove their debt, put up an emergency fund, and be on time in paying their bills. Meanwhile, a financial planner is more inclined to help people achieve their goals like setting up a college fund for their kids, buying a new car, or saving up for retirement.
For low-income households facing financial problems like debt, a financial counselor is the best option because he has extensive knowledge of their situations. A financial counselor can work out payment plans for credit card bills and other types of debt. This is just one of the many services that a financial counselor offers those who are stuck in a mountain of debt.
A financial planner, on the other hand, offers advice on how money is invested, what employee benefits to grab, how to save up for college and retirement, and other big financial goals. He can also provide advice if a client is on track to meet financial goals or needs to make changes to get back on track if he steered off the path.
Benefits of Hiring a Financial Advisor to Help Get Out of Debt
Financial advisors are experts when it comes to helping people get their finances in shape not only for today but in the future as well. They provide services which include preparation of income tax, investment management, estate planning, and more. When it comes to debt management, a financial advisor can help a client with the following:
The right financial advisor can organize the client’s available funds and pinpoint existing and possible problem areas. He can draft a balanced budget that includes all essentials without the possibility of adding more accounts to pay off. He can trim off expenses that are unnecessary to free up money to pay down the total debt owed.
Debt Analyzing & Restructuring
A financial advisor can analyze all the different types of debt the client has and organize them according to priority as a strategy for debt repayment. The ones with the highest interests go on top and those with low interests go to the bottom of the list. He can also look up the option to restructure debt to make it more beneficial for the client.
Long-Term Plan Creation
When paying the debt off fast is not possible, the financial advisor can help draw up a long-term plan for the client. If the debt payoff plan is already up and running there are other things to consider such as life insurance in case of death, a retirement fund, and so on. To prevent future financial problems, a financial advisor will take an overall view of the client’s situation and create a long-term plan specifically suited to his needs.
Types of Financial Advisors
Hiring a financial advisor should be taken seriously. He or she must be certified to provide financial advice that will help a person eliminate debt efficiently. Below is a list of qualified financial advisors:
- Credit Counselor
- Certified Financial Planner (CFP)
- Certified Public Accountant (CPA)
- Chartered Financial Consultant (ChFC)
The names of certified financial advisors are available with the National Association of Personal Financial Advisors and Garrett Planning Network. Referrals from family and friends who have utilized a financial advisor’s service can also help in the selection process.
A financial advisor can either adhere to the fiduciary standard or to the suitability standard. If he operates on the fiduciary standard, the financial advisor will give you advice according to your best interests while the one keeping to the suitability standard, can advise things that may not be for the client’s best interests. To know which standard they follow when providing services, they can be asked directly.
Financial advisors are being paid in different ways: hourly rate, commission-based, and percentage-based. Ideally, when it comes to choosing a financial advisor, one must take into consideration someone who is appropriate for his needs.
Debt can be settled if an individual has the determination to improve his financial situation. It cannot be done overnight especially with no money or assets but becoming debt-free after some time is possible. When no amount of hacks and tips will work in reducing the debt, turning to a financial advisor to help get out of debt can really help. As they’re backed by extensive knowledge and experience in debt