When it comes to money, I’ve had to learn the hard way. I grew up very poor. When I left for college, I discovered that my father had basically stolen my identity and ruined my credit. (He did the same thing to my brother, the bastard. :mad: ) A few years later, I got out of a bad marriage and was stupid enough to run up my credit cards. After a lot of work, I’ve paid off all my bills except my student loans.
Mouse_Spouse had a good-paying job with great benefits: free snacks and drinks in the office, generous health benefits and employee stock options. (I work in academics; it doesn’t take much to impress me.)
Since we’re becoming parents this fall, Spouse and I have been talking about our future plans. He’s mentioned things such as “college funds” and home ownership. I’m very much out of my depth. Having lived most of my life one pay check away from disaster, my idea of a long-term planning is a savings account.
Today I suggested that we see a financial planner. I’ve never done this myself, does it help?
Thank you.
P.S. Are there any good books for the fiscally clueless?
My brother and his wife saw a financial advisor that was paid for by his employer. This person was able to look at their finances and make suggestions like "It’s great that you have $XXX in the stock market, and your only real debt is your mortgage. But you know, it’s nice to have some cash on hand for emergencies. Got any plans to put some money in a nice accessible savings account? Nice house. You say you plan on remodelling your kitchen? How are you going to pay for that? Here are my suggestions. . . . "
Sis-in-law was thrilled and has recommended the guy (or a guy like him) to anyone she knows who will listen–and a few who don’t(me).
While you can, I think, find advisors who will help you pick stock to invest in, etc., this guy was all about the big picture strategy. And since my brother was earning more money that either of them had ever seen before in their lives, and they were starting a family, and had just bought a house, some advice about when refinancing makes sense, how to save money for college etc. was useful.
Certainly check with your human resources department to see if your company offers any financial programs. My (large) company does, both on-line and in seminars. My bank (a credit union) also offers free financial planning and investment advice.
There are also a ton of good books available at the library and the book store. I read and reviewed about 7 of them last summer for a project and found that they mostly offered similar advice. I threw my reviews out, however.
A finacial planner should be able to help you develop a budget and a savings plan, and also help you decide how your savings should be invested. They will also need to charge you for the service in some way. All companies should be able to make a profit, but some planners have high and/or hidden fees that some library work will help you evaluate.
Most of the areas I know are UK-based so not much use to you. However:
It can do, depending on how much they charge - if you can see one through your company it might be cheaper. I don’t know if its the same in the US, but in the UK you need to make sure its a IFA rather than one affiliated to a bank. Financial advisors affiliated to finance organsations have been know to suggest the product that gets them a high commission, not the one you need.
The Motley Fool range are normally reasonable introductions. They’ve got some online guides on their US site here that might help. (Ouch! I’ve just realised they charge! The UK lot don’t.)
I would suggest learning as much as you can about this. No matter how skilled a financial planner is, at the end of the day its not their money, and no one knows your situation as well as you do. I’d suggest using a visit to one as a starting point, and then investigate the options they suggest, rather than as a way to get a set-in-stone strategy.
Stainz and I started seeing one just over a year ago. (he works at Investors Group if anybody cares)
I highly recommend it, it was a great reality check. Due to circumstance, Stainz’ job was eliminated and our monthly take home income went from ~$5000/month to ~$3600 a month.
When we were bringing home $5000/month we seemed to be living pay cheque to pay cheque with no end in sight. We saw our advisor, we now consolidated our debt, set-up an investment portfolio for our daughter, moved all of our investments over to Investors Group, bought some decent life insurance and got some great will advice.
We are still more less living pay cheque to pay cheque, but the end is in sight. We are just kicking ourselves for not seeing one 5 years ago when we had so much more income coming through the door.
BTW, this has cost us $0! The way our advisor makes his living is by taking a small percentage of the profits on certain investments, and a commission off of our life insurance.
That was how it was explained to me to (by a financial advisor at an information session for women put on by the library).
He explained that they go over your budget, what your debts are, what you can afford as well as stuff like insurance, wills, investments. It was a very informative session, now I just need to get to an advisor myself.
It seems to me that this means that the financial advisor has an incentive to advise you to invest in those things that earn him a percentage and not those that cost you the least amount and have the best return. The usual advice I’ve heard is to go to a fee-only financial planner, who has no such incentive. It will cost you (a few hundred or thousand dollars at most) but will provide the most unbiased advice.
My only advice is to read. Before getting an advisor, broker, consultant or paid stock/mutual fund picker, you must read. Get a bunch of newspapers, for starters, and read the financial section. Become familiar with the terminology of money and investments and real estate, or you’ll be forever lost when an advisor starts talking about margins and real return and crap.
The financial section of your newspaper will get you started and will invariably review books about investment and money management. Go get some of those books. Or just go to the library or book store. Both have huge sections on money management. I don’t have any titles to offer, but you honestly don’t need any suggestions, because you should read lots and lots. There are a zillion different ways to manage and invest money. Just because Ed Zotti says put it all in pig futures doesn’t mean it’s a good idea. I have a broker and an advisor. I trust neither one to put my needs ahead of their career or their company’s agenda. I take their advice and evaluate it. I’m more conservative than my broker, and I take slightly more risk than my advisor.
The key is education. You absolutely just have to educate yourself, even if you find the whole business depressing and distasteful, as many do. You can’t expect an advisor to take the responsibility for your investments out of your hands.
Actually, the guy who gets a fee up front has an even greater incentive to invest in vehicles that pay the most commission because, by giving him a check upfront, you’ve practically guaranteed him that he’s going to get your business. The guy who doesn’t charge a fee upfront is merely HOPING he’s going to get your money. Competition is a good thing and helps keep the brokers honest. (Especially considering that a huge portion of their business is referrals.)
Get thee to the bookstore and buy a copy of “The Wealthy Barber”.
Financial basics in language less intimidating than banker-ese! It’s a small book and an easy read and will give you the confidence to sit down with financial consultant types, no matter their stripe, and not feel out of your depth!
Never be ashamed about learning things the hard way. Everybody learns some things this way. And some people don’t learn, count yourself lucky.
At the risk of piling on, have you calculated how much this has actually cost you in comparison to buying some index funds (or whatever)? Certainly, your advisor has provided a service, and deserves compensation for that, but you might be surprised how much that small percentage ends up adding up to over time.
I’m suggesting a fee-only financial planner, who doesn’t get any commissions from your investments, over one who is “taking a small percentage of the profits on certain investments, and a commission off of our life insurance,” as is the one used by McDeath_the_Mad.
I don’t agree. I don’t trust the fee-only types; most are in business for themselves and I just don’t see how you guarantee you haven’t got yourself into dealing with some guy who’s going to make off with all your funds.
IMHO your best bet is to go with a financial advisor from your bank or from an investment company. Yes, they’ll sell you their funds but they also usually have access to a variety of funds. I have an Investors Group guy and a guy at my bank and I’m pleased with both.
The other thing I did is attend a whole weekend of financial seminars where I learned about the various instruments and how and why people invest in them so when my investment guys suggest different sorts of funds or investments, I have an idea of what they are.
First of all, such vehicles do exist, such as the mutual funds I’ve purchased directly from Charles Schwab and Vanguard. Second, a fee-only financial planner is not a stockbroker, but instead is someone whose business is providing investment advice to people (as an example, the members of the National Association of Personal Financial Advisors).
Now, I’ve never worked with any financial advisors (so I might be completely wrong), but I imagine that such a financial planner would only advise you where to invest your money, but wouldn’t be able to make off with all your funds because he or she doesn’t have access to any of it.
This is important. Even the most well-meaning adviser or broker isn’t going to care as much about your money as YOU DO. You can take their advice, take their investments but at the end of the day it’s YOUR MONEY. Not knowing what your money is in can be a recipe for disaster.
My own well meaning mom opened up a Money Market account for me after I got out of college. It wasn’t until after the first year I found out I was paying a $50 maintenance fee on an account I only earned $38 in interest on. I was LOSING MONEY by having my money in this account.
And $12 is the least of some of the horror stories I’ve heard. Bottom line, whether you go with an adviser or a full-service broker, YOU need to know what your investments are and what they do.
If you want to read one book on saving for retirement and savings in general, may I suggest The Automatic Millionaire? I gather it’s rather the classic in the area, it will take you like five minutes to read, and the advice is first rate.
We are living in a lot different times today for the individual/family investor. For most people, a financial advisor meant “broker”. While radio and television reported the markets in real time, mostly it meant reading WSJ. The amount of general financial investment material on the internet is staggering - and a bunch of firms offer online trading and investment with individual stocks and indexed mutual funds for very low fees. My father had a broker that only seemed to “churn” offerings that only made money for the brokerage house, so I am definitely biased against “financial advisors”. There has been a real democratization of financial data and investment opportunities.
With all that - how much money are we talking about - significant amounts or a large windfall definitely require the services of a competent tax attorney and investment professional but for most people that (unfortunately) isn’t a factor.
That’s true. It’s also true that anyone can publish anything on the net, but most of it isn’t worth reading. With so much advice on the web, who has the time to read and evaluate all of it?
I went to one of those “plan for college” seminars when my youngest was little, liked the guy, and started a small money market account. Having him as an advisor came in handy when I got a bunch of money for leaving one company for a better job in another. I’ve had 3 good advisors out of four so far, and one of them made me a whole bunch of money in investments I never would have thought of myself.
I agree that you should always know what is going on with your money, but you should also listen to advice - make the decisions yourself, but listen. Financial advisors can be good in getting you to do stuff that you should do, but might resist, like rebalancing portfolios. I suppose that someone who feels they are brilliant at investing can do a comparison between their decisions and those of a planner. I’m not brilliant in this way, and I’ve done a lot better after admitting it.
I’ve no experience with the type of planner who helps you handle credit and balance a budget - that I am good at.