While she recognized that clients could develop a budget on their own, she said it could help the advisors get a clearer picture of their young client’s household cash flow and build their financial plan. It also gives advisors a platform to begin to make some habit-changing suggestions.
The first is to delay large-scale purchases, such as a house, vehicle, or international trips, especially with more interest rate hikes coming. But, that could also apply to smaller items, which could put pressure on their expenses. They could put those off until the economy restabilizes.
“It’s a good time to set that cash aside for necessities for the next six to 12 months,” said Yang, noting clients could pull further ahead by eliminating some discretionary spending
The second suggestion is to work with clients to figure out how much debt they have, then guide them on how to pay it off, particularly now that interest rates are rising, possibly increasing their payments. One tool, for instance, is converting their home loan credit to an existing mortgage, which has a lower interest rate. That could help them put more on their mortgage.
“We can help them restructure it to pay it off faster and we can apply certain strategies to make them feel more comfortable during this time because their advisor is there to guide them,” sapid Yang. “That can really promote a healthy mindset with your clients as they learn we can all make short-term sacrifices that will bring us long-term financial success.”
