Debt can help you or hurt you. Unfortunately, most Americans are hurt by it.

We are proponents of eliminating debt, and living below your means. However, in rare cases, debt can be properly used to enhance returns, protect against unnecessary penalties, and help individuals stay the investment course without realizing unnecessary capital gains from their investment strategy at inopportune times. In almost every case the suggestion of debt is short-term in nature and can easily be paid off in an emergency.

Liability management is a critical tool for protecting and preserving your wealth in the event you choose to leverage debt for a specific purpose.

Financial planners sometimes recommend that investors leverage credit (debt) to build wealth, maximize portfolio value or achieve specific lifestyle goals. Personal liability management (PLM) hedges against unexpected events related to debt that may threaten your financial stability and compromise the value of your portfolio.

What Is Liability Management?

Liability management is the analysis and management of debt.

Among high net worth Americans, approximately 75 percent carry a mortgage on their home. Almost half of affluent U.S. residents have credit card-related debt. In many cases, however, these individuals do not plan their use of credit or consider how it may negatively influence their personal wealth.

The strategy for managing personal liabilities is similar to that used by financial institutions and commercial organizations. Part risk management and part strategic financial planning, PLM seeks to help you avoid any long-term, negative changes in your personal wealth in the event of an unexpected situation.

For example, although some savvy investors anticipated the financial crisis of 2008-2009, many others lost everything. Effective strategies for managing unexpected events will help to ensure you don’t have to start over in building your wealth and planning for retirement.

Liability Management - man buttoning suit jacket

Why Is Liability Management Necessary?

Debt is number one reason most people fail to reach their financial goals. Having a professional help you tackle your liablities can greatly enhance your financial plan and emotional well-being.

Our CFP® advisors will help you rid yourself of unnecessary debt, freeing up cash flow to help you achieve your financial goals more quickly. In the rare event that debt is necessary, we will make sure you have a plan in place to quickly unwind the debt if needed.

How Can Liability Management Benefit Your Utah Personal Wealth?

The acceptable uses of credit are generally limited to stabilizing cash flow during sudden times of need and to cover unexpected expenses without having to disturb portfolio assets.

However, if you would like to leverage credit instruments to help you attain some specific objective — portfolio growth, lifestyle goal, etc. — you should be able to do so safely, as long as you have a program in place to manage liability and limit potential risks. Your financial planner can help you decide if acquiring debt is the best way to achieve your goal.

In Utah, Divergent Wealth Advisors takes a revolutionary approach to financial planning, providing an unprecedented level of personal service at a cost that appeals to the most discerning investor. Contact us today to learn more about our service offerings, including real estate analysis, insurance risk analysis, retirement income planning, portfolio management and more. We look forward to assisting you with all of your liability management needs.