“DEBT-FREE” – MANTRAS and RULES of THUMB
Q: THERE IS A LOT OF MATERIAL IN THE FINANCIAL PRESS URGING INDIVIDUALS TO BECOME “DEBT-FREE.” HOW VALID IS THIS FOR EFFECTIVE WEALTH MANAGEMENT?
Being debt-free is a popular topic for advice today on radio talk shows and internet blogs. Google the subject and you’ll see all sorts of tag lines: “5 steps to becoming debt-free,” “10 steps to debt freedom.” We would classify much of this as overly simplistic since this is not a question where a “one-size-fits-all” approach is the best path to follow. Paying off every last penny of debt might feel really satisfying, but it may, or may not, be the right move. Not all debt is created equal, so be careful about rules of thumb.
Q: WHY DO YOU SAY “BE CAREFUL?”
Simply that you need to really look at each specific question about indebtedness on its own facts and merits. In our 46 years of advising families, we have learned that generalizing “all debt is bad” can lead to poor financial decisions. In some cases, those who are providing advice may have a conflicted agenda, wherein they may really be selling a “program,” a book, or even a software program to help you manage your way to debt freedom. If you are going to get financial advice on this topic, seek help from a wealth advisor who is a pure fiduciary, legally obligated to put your interests first and to fully disclose any conflicts of interest. That is the approach we follow at Linscomb & Williams. Regardless of whether individuals choose to come to us or not, we strongly recommend that they seek advice from a similarly inclined fiduciary, who delivers client-centered advice.