Teach Your Clients That Moderation Is Good

Most credit repair agencies stress on the fact that debts needs to be paid fast; and credit cards debts even faster. People who want to take care of their credit scores get into a frenzy to liquidate their debts, especially the highest interest debts at the earliest possible time. When this becomes the case, warn your clients about the dangers of moving too fast through debt clearing motions. This might actually hurt them psychologically, financially and can even potentially hurt their credit score. Here are some important points to help guide your clients to a successfully debt free future.

Teach that Being Debt Free Is Good, But Moderation Is Needed

When explaining to your clients about their debt free futures you  can compare the process with a crash diet. They will lose the extra pounds quickly; but they will go on a binge almost as soon as they are off the crash-diet with disastrous results. In the end they will end up weighing more than when they began, and hating diets in the process because they will convince themselves that diets do not work.

Similarly, charging through payments and minimizing every other expense will make them desperate to break free of the debt clearing habits. When they allow themselves to get into this mindset they will be worse off in the long run. The  trap here is in the exhilaration coming from the ability to spend once again. This is a financially devastating doom that will thrust them back into debt again.

How will they know whether they are doing well with the repayment of their debts or not? Make your clients aware of these 5 key factors that should raise red flags for their financial future:

1.    You have nothing left for emergencies – Something as minor as a flat tire will send them into panic – if they do not have the ability to cover the repair or replacement. Stress the importance of having $500-$2000 stowed away in case of an emergency. The alternative, they will find themselves having to reach for that credit card and then they will find they are in debt again.

2.    Your budget took out all the joys of living – It is imperative to draw a budget, of course; without it your clients can never reach their  dream of getting rid of debt. However, ensure that they leave a little window for entertainment; i.e. a cup of coffee at their favorite café, having a friend over or going to a movie, treating themselves to some small pleasures each month. If the budget is too strict and is making your client a bitter person – they are not on the right path. The key is restraint and moderation, not deprivation and misery.

3.    You encroach into the important areas in your life – There are two things that they should NEVER cut back on,  (1) health insurance, and (2) retirement investments, especially those funds where their employer also contributes, such as a 401K. There is no bravado in paying back debts, if this results in the risk of losing health benefits or sabotaging their future.

4.     You are suddenly too dependent upon friendly hand loans – If your clients are on a very tight budget and suddenly find they are borrowing money every month from friends just to stay afloat- there is clearly a problem in their future. If this is happening to your clients, advise them to reevaluate their spending and stop the behavior. They are risking their friendships and the quality of their future life.

5.    You are unable to stick to the repayment plan – If your clients feel the repayment plan is too demanding of their finances or their quality of life, maybe it is. While the best efforts and resources must be channeled towards the repayment of debts, they should be able to stay on the plan of action in order for it to be effective. If you find they are deviating all the time, or borrowing to keep the budget on track, it is time to reevaluate the budget. Show them that borrowing from friends and family is just like borrowing from a credit card without the high interest rates. It is still debt producing behavior.

This is a good time to teach that moderation is indeed a virtue; and it applies equally to spending as it does to repayment of debts.

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