Life events usually equal money events. Death, marriage, divorce and retirement all include important money decisions, yet not everyone has the time or resources to think them through. Deciding when to consult a financial adviser is different for each individual. Typically, there are three events when most people decide to consult a professional financial adviser. These include:
- Receiving an inheritance;
- Considering a complex investment product, and
- Making portfolio/401(k) investment choices.
If you are truly not a numbers person, you have a complex financial life, or if you are unsure of your ability to recognize a good investment, a professional’s advice may give you the perspective you need to move forward. If you know a little bit about finances and investing, and are willing to learn more, financial planning on your own can be done with time, effort and diligence.
Do-It-Yourself Financial Planning
If you decide to do your own financial planning, your toughest challenge will be understanding that investing should be secondary to your overall financial plan. In addition to investing, financial planning incorporates:
- Insurance planning to protect the assets that you have and will earn;
- Tax planning to structure your assets to pay the least amount possible for income taxes, and
- Estate planning to have your assets titled properly so if something should happen unexpectedly, your wealth is transferred to your family or heirs.
With each of these aspects working together, you can begin to develop a financial plan. Once you begin investing, you should continuously monitor your investments, as there are many factors both in your life and the economy that may change your decisions. It will also take considerable discipline to continue investing during market downturns, or during times when you or your family could use a little extra money.
Hiring a Professional
When you hire a professional, you should work with someone who monitors the overall picture of your financial life. Most financial planners work closely with your other advisers, such as your tax consultant or insurance agent, to make sure that all financial matters work together efficiently. They can align your assets with your goals and objectives by defining an appropriate level of risk for your portfolio.
While there may be a scientific method to determine how much money you should need in the future, there is an equally artistic method to balancing your level of risk to the expected rate of return on your investments. A financial planner has experience working with both risk and returns and can design a plan that should satisfy both. A professional will also be able to tailor your portfolio and financial plan to your situation. Professional planners and advisers have made careers from researching stocks, mutual funds and other investment vehicles. They can take out the emotional uncertainty of investing.
Some investors only choose to consult a planner when their portfolio surpasses a dollar amount that they feel comfortable directing. There are also plenty of people who consult a planner when they want guidance on a specific financial situation, such as rolling over a 401(k). What makes each investor unique is their individual goals, the assets they own and their risk tolerances. It is these nuances that a professional adviser considers when developing a financial plan for clients.
If you would like to speak with a financial adviser about your situation, you may call Henssler Financial at 770-429-9166.