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How to help clients cope with the national debt

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Don’t confuse the debt with the deficit. The deficit is the measure of what comes in versus what goes out on an annual basis. Last year our tax revenues were $2.3 trillion, and we spent $3.8 trillion. Our deficit was $1.5 trillion.

Don’t confuse the debt with the unfunded liabilities for programs like Social Security, Medicare and Medicaid. Social Security alone has an unfunded liability estimated at $19 trillion. That means we would have to set aside $19 trillion in a fund immediately to keep the promises we made to all potential recipients. The figure is not absolute, because we could change the program any time, which would increase or decrease the program’s unfunded liabilities.

Rather, I want to talk about our national debt. Why? Our debt has major implications for all Americans and especially for the financial services industry. We are presented with the proverbial crisis/opportunity scenario. Understanding and explaining the implications is vital.

Knowing the numbers
Here are the actual numbers presented by a recent Congressional Budget Office report. Our current national debt is $14 trillion. The CBO says we will be $20 trillion in debt by 2015, $25 trillion in debt by 2020 and $27 trillion in debt by 2021.

As a salesperson, I must provide context for this information. In 2021, only one decade from now, the interest on $27 trillion would consume one half of all federal tax revenue. By 2026, the rest of the world combined will not have enough money available to buy all of our debt.

Agents and clients alike often portray this message as one of doom and gloom, but that misses the point. The message is not negative. Instead, our message should be the Boy Scouts’ motto: “Be prepared.” I am able to diffuse any self-defeating emotions and move toward solutions with a few great questions, such as:

  1. Have there been bad financial times in the past?
  2. Did some people still make money during those bad times?
  3. Who prospered–people who planned and prepared or people who didn’t?
  4. Which one do you choose to be?

The questions can be taken in many different directions or can be used along with the first set of questions, for example:

  • Is it “doom and gloom” if the government doesn’t pay your way?
  • Is it life threatening if corporations don’t pay your way?
  • Is your life over if the unions don’t provide for you?
  • Do you want to be dependent or independent? Do you want to be in control or do you want to be controlled?

Always end with “When do you want to get started?” Ask and you shall receive.