The past two months I have written about on-boarding new clients and EPRTM in order to get a closer look at helping your client achieve clarity; specifically around where to put their extra cash flow each month.
In my book, “The Role of Liability Management in a Successful Financial Services Practice” I go into the concept of quantifying the cost of borrowing and how it affects the many facets of your client’s life. Do your clients use extra cash flow to save mortgage interest and prepay their mortgage or use it to invest and have their wealth appreciate outside the home? This is a cash flow question and at the heart of each of your client’s financial decisions.
Let’s take a quick look at equity inside the house. Equity does not earn a rate of return. Appreciation acts independently from equity since appreciation is driven by market forces of real estate. Wealth inside the house reduces the amount of interest you pay and that is where EPRTM is important. Do you ask your client what is important to them about prepaying their mortgage? Do you analyze the cause and effect of doing that?
This is the time I use our Borrow Smart™ software to show what happens when you locate your wealth inside or outside the home. I have included a sample analysis to show what I deliver to my clients when discussing this.
In the analysis you will see the section called “Future Wealth Comparison”. See what happens when the client invests the payment difference from the old mortgage and the new lower mortgage. Over 26 years this client would build an account of $356,000 without increasing their monthly cash flow. To me, that is SAFETY!
Call me anytime at 619.226.3234 or email me to discuss this analysis and what goes into making it happen. I am happy to share what has helped many clients move towards financial freedom.
