Why less can be more in 2012

We’ve all heard the phrase “less is more”— realtors, home stagers, and makeup artists say it all the time. But how can this phrase apply to finance? How is less more when it comes to money? Don’t we want our clients to have more money? In 2012, giving your clients the advice they need can help them pay off more debt, and less debt is certainly smart way to gain more wealth!

I think it was around January of last year when our national debt to income ratio finally crested the 150% level. A few months ago I read we were starting to reduce our debt (mind you it was by a miniscule amount). However, very recently we see Canadians have achieved a new record—household debt has rebounded to 152.98%.

Do you know (with a high degree of certainty) if your clients have increased or decreased their debt this year? How do you know? If your answer is that you do a questionnaire with your clients, or gather debt data, you may not really know the answer to this question. The fact is that clients compartmentalize debts in an effort to reduce their stress levels when thinking about it.

Case in point earlier this year when TitlePLUS commissioned a study on what people understood about their home equity lines of credit (HELOCs). The research showed that there were a lot of things people didn’t understand about the HELOC’s. One that stood out for me was that 57% of respondents didn’t understand that taking out a HELOC meant that their lender put a mortgage on the home.

So nearly 60% of people didn’t count their HELOC as a mortgage! I’ve seen many cases where people don’t even consider it “real” debt because they own what they’ve borrowed against. If you only asked fact based questions on a brief questionnaire you could be getting some really inaccurate answers. Are your clients happily reporting they’ve paid off their mortgage, but don’t consider their $50,000 HELOC to be worth mentioning?

It’s not that you shouldn’t ask fact-based questions—as a belated Christmas gift, I share with you my Debt Checklist so you can make sure you delve into the level of detail you need and ensure accuracy when it comes to client debt.

What also matters is how you feel about people in debt. No one wants to be judged. If your clients feel that disclosing the credit card balances that have been creeping up on them may result in a stern talking-to, they just won’t tell you.

Your clients’ debt is certainly a case of “what you don’t know it can hurt you”. When you don’t have the most accurate debt figures on all of your clients’ debt you could inadvertently be giving them the wrong advice. Take a moment while you reflect on 2011 and plan for 2012 to ask yourself: How do my clients think I feel about their debt? What language do you use when you talk about debt? Is it language your clients would want used about them? How do I feel about my own debt? Am I pleased with my debt repayment progress this year?

Every year my number one goal is to change the landscape of the financial services industry to include debt and spending, 2012 will be no different. I am so very proud of the progress I made in this area of finance in 2011.

Thanks to my mission I was able to finish a second book, entitled $pent , I partnered with The Knowledge Bureau and created a certificate program so that advisors can become Certified in Debt & Cash Flow Management and successfully lunched The Money Finder Bootcamp and The Money Finder Coaching Program as well as met all my writing goals. I believe now more than ever that the change I know the industry needs is possible to create.

I want to wish you all a very happy, healthy and financially fit New Year. May you be the change you wish to see in the industry and may 2012 be your best year ever!