High debt levels can happen at all income levels. In fact, there are many high-income earners that have little or no net worth. Debt management is driven by cash management and budgeting.

• Collect data representing actual cash flow over the last 12 months
• Use prior year data to project cash flows for the next 12-24 months
• Review expenditures by major category
• Review client existing debt structure
• Spot cash management problems
• Find excess cash for implementation of other financial planning decisions
• Use projected cash flow to assess impact of financial planning decisions so that final uses of cash are matched with the sources of cash

 

It is also critical to carry enough disability and life insurance. If death or long tem disability struck, the debt management problem would be magnified for the survivors. Since cash flow is tight, term life insurance should be used. When the client's financial situation improves, the term life could be converted to permanent insurance (if appropriate) to function as another forced savings vehicle.