When to hire a professional financial planner is a question many people struggle with. No one wants to overpay for services or products and no one wants to be made to look like a dolt by a smooth talking seller of financial products. Making the decision to hire a financial planner can be disconcerting if you’re a person who second guesses yourself. “Did I really need to hire a financial planner?”
When you decide you’re taking a trip somewhere, you gather information from people and sources you trust and then you go. Consulting a financial planner is no different. Whether you’ve designed it or not, you are heading somewhere in your financial life. Many people believe, to their detriment, that only acquiring a certain net worth makes the question of hiring a financial adviser relevant. These are often the folks who fail to recognize TIME as one of the biggest assets on their balance sheet.
Typically, people choose to work with a professional financial planner for one (or more) reasons:
- Staying on track
Hire a financial planner for the knowledge
Financial decisions can be complex, and you need to be certain that you have the knowledge to make the right decision. For some, that means educating themselves. For others, it means utilizing a professional financial planner’s knowledge on your behalf.
Hire a financial planner for the ability
A lot of your financial decisions take time to analyze and weight properly. A financial planner can help do some of the analysis and heavy lifting for you – ideally so that you can cut to the chase in your meeting about what you should actually DO to move forward towards your goals. For many, hiring a professional is simply a matter of effectively delegating to someone else what you don’t want to spend time on, so you can enjoy your own time more instead.
Hire a financial planner so you stay on track
For some, having a financial planner helps to keep them on track towards their goals. For many of our challenges in life, the problem isn’t WHAT to do, it’s getting it done. Regular reviews with a financial planner can help to keep you accountable to your goals. Think of it like hiring a personal trainer for your financial fitness to help you stay on track.
Life’s milestones can spur you to action
From a practical perspective, most people make the first step towards hiring a financial planner when they reach an important financial decision or event where they realize they need help and/or are in over their head. Some common milestones when people take their own first step towards a financial planner include:
1) More money in your pocket – getting a first job, or a new job that pays a lot more, or a significant raise or bonus, where suddenly there is extra money at the end of the month and you need to decide where/how to save and invest it. This is also a great time to start talking about disability insurance – you probably still think you’re pretty invincible, since the teenage years aren’t that far behind, but in reality the risk of being disabled is far higher than the risk of death, and can be far more financially disastrous. Your ability to earn income from work for the rest of your life is like your own personal money tree; make sure your money tree is insured.
2) Starting a family – getting married, and having children – are major financial turning points in most people’s lives. Both circumstances bring a whole new set of issues to the table, including the potential need for life insurance, saving for college, and trying to stay on track for reaching financial independence in the future. A financial planner can help organize all these competing demands and prioritize them with you so that you properly fund each.
3) Buying a home – although the first professionals most people work with is probably a realtor and a mortgage broker, a financial planner can help you figure out how much house (and how much mortgage) you can reasonably afford and still achieve your goals. Sadly, a lot of people might have avoided today’s housing crisis and the potential of a foreclosure if they had the guidance of a financial planner up front to help them understand the mortgage they were getting themselves into and whether they could really afford to borrow so much to buy so much given their income.
Finding a financial planner isn’t difficult but it is an important decision that shouldn’t be left to chance. Get references from friends and family and from people you admire and respect … and trust. Remember: you are headed somewhere and a good financial planner can help you get there sooner, easier, and maybe even richer, than you could on your own.