Why The Debt Snowball Isn’t Always The Best Way To Pay Off Debt
When I started financial coaching more than 10 years ago, I had many clients who came to me and their number one goal was to get out of debt. Probably like many of your clients today.
They’d tell me their financial info, I’d plug it into a debt snowball calculator, and it would spit out this beautiful, perfect debt payoff plan that I would then present to the client.
And sometimes it would work.
But you know what, sometimes it didn’t.
My client wouldn’t stick to the plan or they’d fall off the wagon. I’d beat myself up about it and internalize it as my own failure (because we all fear this very scenario – a client pays us but they don’t see results!).
But I kept at it. For the clients, who didn’t see the debt snowball as the perfect plan I thought it was, we’d brainstorm and figure out why it didn’t work. We’d make adjustments and try something new, or a lot of new things.
And then I had an epiphany: What if I approached debt the other way around?
What if I didn’t assume the debt snowball was the best way?
It’s a common belief that there is one right way to approach money and several wrong ways. At least that’s what the financial gurus (who contradict one another) will tell you. But as I found out and as I’m sure you’ve noticed, money doesn’t work that way.
There isn’t one right way to do things. And there’s especially not one right way to pay off debt.
In fact, I want to shake the whole approach to the way us financial coaches approach and think about debt. I don’t think it’s doing us or our clients any favors.
There are two big things the financial industry and gurus get wrong about debt.
Excuse me here while I hop up on my soapbox…
The First Thing
Debt is shameful. What’s taught and widely believed is that getting out of debt is a painful experience. It’s done by sacrifice and restriction. It’s not supposed to be a fun process. You have debt because you’ve made mistakes or poor decisions. And you should feel badly about that. There’s one financial guru in particular who has built a business around making debt the villain so of course this is the messaging we hear.
The result: Shame becomes the the motivation for getting out of debt.
The problem: So many things. Shame is a short-term motivator. Shame makes it hard for people to trust themselves. Encouraging change by using shame is the opposite of what financial coaches should be about.
The Second Thing
Debt elimination is a goal. It’s actually not. Paying off debt is a strategy we can use to achieve a particular goal, but it’s not a goal.
Read that again.
The result: Clients make decisions from looking at their past, not their future.
The problem: Clients get tunnel vision and believe getting out of debt will somehow change everything about how they feel and think about money. They manage their money one way while getting out of debt then have to make a massive shift in their strategy and mindset once the debt is paid off.
A Better Approach to Coaching Your Clients On Debt Payoff
After I realized I had been approaching debt all wrong (because I, too, learned all wrong), I asked myself this question:
What if instead of approaching debt as the thing to run away from, I instead found something my clients wanted to run to?
Instead of getting my client’s info and plugging it into a debt calculator, we talked. I asked them to tell me about the debt they had, why they had it, what good it brought into their life (yes- good!), and most importantly, what it would mean if that debt was gone.
I asked, “Why do you want to get out of debt? What’s on the other side of paying off that debt? What can’t you do now because of that debt? How will having it gone make your life better?”
The conversation flipped. It became about creating the why behind the debt payoff. That why became the client’s goal and served as a much better motivator than the shame they had previously felt.
The result: A much more enjoyable and holistic way to approach debt payoff and clients achieving their goals while getting out of debt!
It’s better for our clients, and it’s better for us.
A Step-by-Step Training Video for Financial Coaches On Debt Payoff
That’s why I recorded this 90-minute video all about the way I approach debt payoff strategies and how you can better coach your clients to get out of debt.
In the video, I go over step-by-step how we create pivotal shifts in our clients’ minds about their debt, how we point them toward the future, and how I overcome the shame programming most of us have been taught.
Grab a notebook and pen because I can guarantee you will want to take notes! As you’re watching, leave us some comments on the video and let us know what you think about this approach and what takeaways you gained!
Here’s your action list, Coach:
- Watch the video and take lots of notes
- Share your takeaways with us by leaving a comment (or 2!) on the video
- Transform your client’s relationship with money & debt
- Feel proud, confident and amazing
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