We all need outside advice from time to time, especially when it comes to managing money. Did you know that even financial advisors have financial advisors? So how do you know if you need one? We’ll talk about that on this Faith and Finance.
We all need outside advice from time to time, especially when it comes to managing money. Did you know that even financial advisors have financial advisors? So how do you know if you need one? We’ll talk about that on this Faith and Finance.
While we all may need financial advice from time to time, not everyone needs to hire a financial professional. But more folks do than you’d think. So how do you know if you’re one of them?
STEPS TO DETERMINE IF YOU NEED A FINANCIAL ADVISOR
To determine if you need an advisor, you need to evaluate your financial picture. You’ll want to look at several things.
1. Figure out your net worth. This isn’t how much you make, but how much you have in all of your financial accounts and real property, minus what you owe, like credit card debt, auto loans, and your mortgage. What’s left over is your net worth, and ideally, you want that to be in positive territory.
2. Look at your monthly cash flow. How much do you have coming in and going out? If you’re living on a budget, this is easy to do. You already have those numbers. If you’re not living on a budget, download the FaithFi app and use it to set up a budget today.
3. Decide on your financial goals. Some will be short-term, others long. Are you saving for a new car? To buy a house? Or to retire at a particular age? Put your goals down on paper and consider whether you’re on track to achieve them.
4. Decide how much of a risk you’re willing to take with your investments. Much of this is based on how long you have until you think you’ll need this money. If it’s more than 10 years, you can afford to put most of it in stocks, mutual funds, and index funds, if you’re willing to take the risk. But the longer your investment horizon, the safer it is to invest in the market.
Okay, so now you have an idea of your net worth, your cash flow, your goals, and your risk tolerance. But you still don’t know if you need to hire a financial advisor. So here are some reasons you might want to find one:
You’re experiencing some big changes in your life. Maybe you’re just tying the knot and now you have to marry your finances together, as well. Or you’re a little further along and expecting a baby soon. Or you realize that retirement is closer than you think. Any one of those major changes might call for bringing in an expert to go over your finances to make sure you’re on track.
Or maybe you know you’re not on track. You’ve established your goals, and you realize you’re not getting any closer to achieving them. Taking on a financial advisor could make all the difference, holding you accountable and getting you back on track.
Of course, one of the most common reasons to retain a financial advisor is if you have doubts about how to invest your money. How much risk can you afford to take on? Which risks are worth taking, and which are not?
We believe that hiring a financial advisor will pay for itself in most cases, whether it’s for taxes, estate planning, and especially investing.
Let’s say you receive a major windfall. This could be a lump sum from a pension buyout, an insurance benefit, or an inheritance. It’s a lot more money than you’re used to dealing with, and you don’t want to make any mistakes. You might want to connect with a financial advisor on the best way to deploy that money. For example, pay off the mortgage or invest it? That’s just one question you might want help to answer.
Now, there’s one more situation where you might want to hire a financial advisor, and it’s when you need someone to hold you accountable.
When you know you have to report to someone, even someone who works for you, you’re much more likely to stick with your financial plan.
Those are some ways you can tell if you need a financial advisor. We hope you find them helpful.
On this program, Rob also answers listener questions:
How do you determine the right age for you to begin drawing Social Security benefits?
Is it a good idea to transfer credit card balances and consolidate all of the debt on one card?
How does debt management work, and is that the best way to get out of debt?
How do you determine when bankruptcy might be necessary?
Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.
