Most Boomers Feel OK About Handling Debt

Her clients, 2 young couples, were out of school and had school debt to pay off. But there is nothing more exciting than a first house or a first baby, she says, and so, with proper planning, she got these couples to focus on the house. The prospect of ownership made it easier for them to reduce spending in other areas, DAngelo adds.

A planner has to come up with a plan that will "show them how" this is possible, she says. Of course, she adds, if a client refuses to take action and "takes on the role of victim," then there is not much a planner can do for them.

Jonathan Krasney, a certified financial planner with Krasney Financial LLC, Brookside, N.J., says if a new client was in debt, the first thing that he would find out would be "what kind of debt?" Is it an oversized mortgage, debt from auto leases or loans, or has a client "gone wild on credit cards?"

A home equity loan can be a reasonable way to structure debt while a client tears up credit cards, he says, and there could be the potential for deducting interest on the home equity loan.

What you want, Krasney adds, "is to restructure debt in a way that doesnt suffocate them."

Another option is to take a loan on a 401(k) that is "temporary, and I do mean temporary." The interest that is paid back goes back into the participants 401(k), he adds. Some 401(k)s have provisions that permit loans for any purpose, Krasney says.

And, if a person has a life insurance policy, there is the potential to borrow against the cash value, he continues.

Overall, Krasney says, "debt can be a good tool as long as you dont push it too hard."

Reproduced from National Underwriter Edition, August 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.