April is National Financial Literacy Month, an effort to highlight the importance of financial literacy and teach Americans how to establish and maintain healthy financial habits.
With reports revealing that Americans carry more than $2 trillion in consumer debt and 30 percent of consumers report having no extra cash, it’s time to discuss key issues with clients.
The following blueprint will help advisors talk with authority with prospects and clients and keep them out of debt.
As you begin the conversation, here’s something to broach with clients: Are you ready to start building wealth, rather than just making a living?
If you already have a good income, are you ready to get off the high income/no net worth treadmill and start down the road to financial freedom? No matter what financial circumstance you find yourself in, here’s how to achieve it:
(1) A mentor in the family, in the neighborhood, in the school, in the public eye or in books who can serve as a role model to emulate.
(2) A marketable skill. A skill that can earn money will become gainful employment. A skill that does not earn money will just become a hobby.
(3) Delayed gratification priorities. A dollar invested instead of spent today will be many more dollars available to spend in the future.
THE BASIC TOOLS YOU’LL NEED:
(1) Real assets and true liabilities: Understand the difference between real assets and true liabilities. An asset, such as a dividend paying stock, interest paying bond or income producing real estate will put money into your pocket.
A liability, such as a large credit card balance, an expensive car or a large boat will take money out of your pocket. Your hard earned money should be working to take you towards financial freedom and not towards increasing your income requirements.
(2) Demographic changes:
Understand and anticipate the social and economic changes associated with the coming demographic changes. Demography is the statistical data of a population.
Spending habits are closely related to age and group spending determines the direction of the economy. The wave of high spending 45-54 year old Baby Boomers is rapidly diminishing and the following Millennial Generation has a very different set of values that will dictate new spending habits. Demography really is destiny.
(3) Economic cycles:
Always know where you are in the economic cycle. Financial opportunities are always recurring and are always present somewhere. There are over a dozen named, popular economic cycle theories.
Check the internet for websites that illustrate the Yield Curve, the Index of Leading Economic Indicators, the Institute of Supply Management Index (ISM) and the Chicago Board of Options Exchange Market Volatility Index (VIX) to see where you are in the financial cycle.