With the proliferation of tools on the internet more and more people are choosing to manage their own finances. This is great! Knowledge is power and no one cares about your money as much as you do! However, there are four situations where you should seek a financial planner’s help:
You are busy with your career and family and don’t have enough time to manage your finances. When starting your career, only two rules apply: a) spend less than you make and b) get compound interest working for you by saving as much as you can, as soon as you can. If you do this faithfully for 10-15 years, you’ll find out that you are maxing out the available space in tax-advantaged retirement plans such as 401k’s and Roth IRAs. When this happens, taxes and fees become bigger issues and investment choice is also more impactful as earnings on your money are greater than the incoming contributions. To top it off, as the complexity around your finances is growing, your time is shrinking!
While still current on your bills, your debt load is starting to concern you. Student loans, mortgages, and consumer debt can be like a chainsaw – if used correctly, they can help you fell some pretty big trees, but it’s also easy to have an accident and chop your leg off! Although it’s embarrassing to seek professional help for this type of situation, it’s more important to get guidance before you paint yourself into the proverbial corner. I am one of the few financial advisors who are able to effectively work with clients in this situation. In addition to several years of work experience in consumer finance and collections, the way I charge client fees allows me to fairly charge clients with a small or even negative net worth. Typically what we’ll do with acute debt issues is to take a closer look at your cash flow (I have a very cool cash flow management tool!) and restructure your balance sheet to get better tax treatment, interest rates, and repayment terms on what you do owe.
You want a second opinion on a financial product that you already own. With the rise of better informed consumers thanks to the internet, fall of the traditional stockbroker and life insurance agent, and heightened consumer awareness of financial fraud after Bernie Madoff my sense is that there are fewer and fewer truly awful products out there. What I am seeing is that with historically low interest rates and volatile stock market returns consumers are much more price sensitive! I can give you a second opinion on both your insurance coverage and investment holdings. There is a different process when evaluating what you already have as opposed to a new purchase due to the cost of moving, tax issues, and any surrender fees. I offer a one-time, two-hour Financial Review meeting for $850 where I can review what you already have. I did one of these Financial Review meetings for a client last week where I saved them close to $700 in yearly mutual fund expense fees!
You’ve come into a ‘large’ sum of money. I put the large in quotation marks because large means different things to different people. In my career, I’ve been told that $30,000 is life changing and $8,000,000 is nothing out of the ordinary – it depends on the perspective and experience of the person on the receiving end. While these sudden money situations can stem from things such as accident settlements, lottery winnings, or the sale of a closely held business; for most people in Generation X it is usually from one of two sources: a) stock options/ownership in a publically traded company with an appreciating share price or a liquidity event; or b) an inheritance from the loss of a parent or grandparent. Not only do these types of events have financial impacts, but there are usually significant tax and/or emotional issues to work through as well.