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With the holiday shopping season in full swing, consumers should be mindful of how much they’re stretching credit cards, but data suggest that’s not the case and the profligate spending on credit is worse among same age groups than others.
For example, data from Piere, a personal finance app, indicate millennials will use credit cards to fund 70% to 80% of their total holiday purchases this year. That news arrives not only as millennials’ credit card use for holiday shopping has trended steadily higher over the past several years, but also data show Americans of all age ranges are contending with near-record levels of consumer debt.
Advisors can play important roles in ameliorating the burden of consumer debt. While advisors aren’t supposed to be credit counselors in the strictest sense of that term, the stark reality is many clients – particularly those in younger demographics fall into one of the two following camps. They’re either not well-educated on what it takes to achieve a strong credit score or they are knowledgeable about that and want strategies for getting there and reducing debt.
Credit advice, even in informal fashion, can be a value-add that acts as a client retention tool and it’s one not currently being employed in broad fashion by advisors. One thing advisors should note is that there are geographic implications when it comes to client debt woes.
Debt Problems Abound in These States
Based on analysis of debt-related internet searches conducted by Go Banking Rates, the following are the states where folks most frequently search for debt help: Nevada, Virginia, Delaware, Tennessee Arizona, Florida, Washington, Colorado, North Carolina and Georgia.
Several things are interesting about that list. There’s some geographic symmetry as five of those states are considered southern states, but there are also other issues to consider. For example, nearly all of these states have low income taxes and four – Delaware, Florida, Nevada and Washington, don’t have income taxes. Arguably, that implies there aren’t high correlations between elevated taxes and levels of indebtedness.
Likewise, it can be inferred from the list that consumer debt is a problem that affects people of a variety of political persuasions. Of the 10 states mentioned above, four are reliably blue and four were considered “swing” states in last month’s presidential election. There’s a similar political divide among the states where residents aren’t searching for debt relief all that much, but of the quintet mentioned by Go Banking Rates, only Wisconsin is medium-sized and the other four are small.
Helping Clients Defeat the Debt Scourge
Debt is an incubator for financial regret and many clients are already experiencing that emotion. They know they’re missing out on discretionary investments, retirement planning and other wealth building opportunities by directing portions of their monthly income to creditors.
As advisors know, financial regrets can pop up at any stage of life and these issues don’t discriminate on the basis of age, race or other demographic factors. Baby boomer and Gen X clients may be apt to be dismayed that they didn’t save more for retirement sooner while younger clients, including millennials and Gen Z, may be dismayed about consumer and student loan debt.
As a result, many clients in that position want to break out of that cycle, meaning they’re receptive to advice that can get them out of debt and when they get there, they’re likely to be even happier clients.
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