“There are two strategies for lowering debt and neither is right or wrong,” she added.
One strategy is to look at the account that carries the highest interest rate and pay that off first. The other is more of a psychological strategy, in which the holder pays off a few smaller debts first so that he or she gets a sense of victory, which can then provide motivation to tackle larger debts.
“Just paying the minimum is not going to work,” she added. “An advisor can help show the person how much money he or she is paying in interest,” which should help them prioritize spending.
What an advisor does not want to do is create more anxiety or guilt about the debt. The advisor needs to help the client take a good inventory of the situation, make recommendations on how to begin paying down the debt that is right for that client and then make sure the client stays focused, she said.
“The number of people who feel guilt about their debt tells me they know they have overspent for lifestyle costs,” Bonneau said. “But people are moving in the right direction and people need to know they are not alone.”