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How Financial Advisors Can Help With Debt


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March 28, 2023

In the United States, household debt amounted to almost 77% of the country's gross domestic product (GDP) in the third quarter of 2022.

This amount represents a decrease in the debt-to-GDP ratio in recent years, a trend that experts consider to be due to the country's steady GDP growth.

Such figures also suggest a gradual improvement in how consumers manage their debt. One possible factor for this improvement is the assistance of financial advisors.

How can a financial advisor help if you're currently having difficulty managing your debt? Aside from debt management, what other services do financial advisors provide?

This article explains how financial advisors can help you manage your debt and lessen your financial burden. It also discusses the various services financial advisors offer that can cater to your needs.

Debt is often a significant financial challenge for many people. Still, only some have the capacity or management skills to repay debt. And when you default on your debt, like payday loans, you can get exposed to higher interest, credit score hits, and other risks listed by Debthammer.

Consulting a financial advisor can help you develop strategies to ease your financial burden caused by debt. Keep reading to learn how these professionals can assist you in managing your debt.

In What Ways Can Financial Advisors Help Manage Your Debt?

Sometimes, you take on debt but can't pay it back or have difficulties doing so. If you're experiencing such struggles, consider asking a financial advisor for help.

Financial advisors are well-versed in financial matters like investments, tax, and estate planning and can help create a plan for controlling your debt.

When looking for a financial advisor, remember to choose one with reputable credentials, like a certified financial planner (CFP). This way, you know you're getting the correct financial advice from a professional.

Advisors with CFP certification have met rigorous education, training, and ethical standards to help their clients have a more secure future.

One of the ways a financial advisor can help you is by identifying which debt you need to pay off first. For example, the advisor can recommend paying off the bills with the highest interest rates first and then working your way down the list.

Financial advisors can also assist you in planning your budget. First, they map out your cash flow by checking relevant documents like your bank statements, credit card bills, loan statements, tax returns, and anything else that can affect your financial situation.

Once the advisor identifies the problem area, they can draft a budget covering the essential expenses without adding more debt. A skilled advisor should be able to create a budget plan that makes it easier to pay off debt.

Financial advisors can also help analyze and restructure your debt, especially if you're overwhelmed with different debt types. For instance, you may have low-interest debt like mortgages or high-interest ones like payday loans and credit card bills.

Your advisor can help you navigate these debts and identify which needs immediate repayments, like delinquent accounts and high-interest loans.

Meanwhile, debt with moderate- to low-interest rates can be at the bottom of your list. But ensure you can still make minimum payments so that such debt doesn't become delinquent.

What Services Can Financial Advisors Provide?

Financial advisors can do more than just help you settle your debt. They are also responsible for executing market trades on behalf of their clients. Advisors use their knowledge, skills, and expertise to create tailor-fitted financial plans to help achieve their clients' financial goals.

Other services financial advisors can deliver include the following:

Investment advice: Advisors can provide recommendations and develop an investing strategy that fits your goals, investing style, and risk tolerance.

Budgeting: Financial advisors can provide strategies and tips to create a budget that meets your short- and long-term financial goals.

Debt management: These professionals can create strategies to help you pay down your debt and avoid debt in the future.

College planning: Financial advisors can help you create a budgeting strategy that includes paying for higher education.

Retirement planning: An advisor can create a savings plan that focuses on setting aside a fund for your retirement goals.

Estate planning: Financial advisors can assist you in identifying organizations or individuals you want to receive all or part of what you own after your death.

Insurance and long-term healthcare: These professionals can provide long-term healthcare solutions and insurance options that fit your budget and needs.

Tax planning: Some financial advisors provide tax planning services that include the following:

Preparing tax returns

Maximizing tax deductions

Scheduling of tax-loss harvesting (reduction of capital gains taxes from selling profitable investments)

Ensuring the best use of capital gains tax rates

Planning to minimize retirement taxes

Overall, financial advisors are an excellent help for matters concerning your finances, including debt management. If you need help settling loans and other obligations, consider consulting a CFP-certified financial advisor for professional assistance.


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About the author

Samantha Waites

I try to cover as many topics as I can and offer my readers the chance to find out useful and interesting things as often as possible. I consider writing to be my strongest skill and I am very fortunate to be able to work with a team of talented and passionate writers at my side every day.

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