When you’re short on cash, the idea of spending hundreds of dollars to talk to a financial professional doesn’t always sound like the best idea.
But there are some occasions when the do-it-yourself approach just won’t cut it. The next time you ask yourself, “Do I need a financial advisor?” consider our guide below.
What does a financial advisor do?
A certified financial planner works with individuals and families to assist them with important financial decisions. They can help you select investments for your retirement accounts, understand tax laws, and save for your children’s education.
Chris Janota, an investment executive with Thiernau Financial Services, says that seeing a financial advisor about key decisions is a smart move.
“There are many times to seek financial advice,” says Janota. “First and foremost, if you never have, then you should. Whether it’s budgeting, debt reduction … planning for events such as education for children or grandchildren, or your own retirement: [a financial planner] can help.”
A professional financial advisor gives you essential advice on how to plan for both short-term and long-term goals.
Do I need a financial advisor?
Although a financial planner can help immensely, not everyone needs one. There are certain situations, however, where professional guidance can be very useful. Here are five signs you could benefit from a financial planner.
1. You have a growing family
If you’re planning on getting married or having a child, your financial situation is about to change dramatically. Merging your finances — along with your assets and debts — or having a baby means major financial change. It’s smart to make a plan for how to handle it.
“When starting a family, there are many factors that most folks don’t consider,” says Janota. A financial planner can help a family prepare for sudden changes and achieve peace of mind.
“Sufficient planning may help that family stay afloat after … a tragedy by having enough funds to do everyday things like pay the electric bill, afford groceries, or [take care of] bigger items like auto and mortgage payments,” he says. “Further planning can assist that child by still being able to afford a college education, even though they’re now from a single (or no) income household.”
2. You’re starting a business
Whether you plan on starting a business full time or just want to launch a side hustle, becoming self-employed changes your finances. Not only will your income change, but so will the requirements for filing your taxes and managing your expenses.
A financial advisor can help you understand self-employment taxes. They can also provide guidance on how to accurately track business versus personal expenses to make your life simpler.
“There are many ways for small business owners to save for their own retirement that most folks simply don’t know about,” Janota says. “Speaking to an advisor who can help educate them on these topics is key. Also, an advisor can help them protect their business and personal assets by [making sure they’re] properly insured.”
3. You just received a lot of extra cash
If you have a sudden influx of cash, such as from an inheritance or insurance payout, talk with an advisor before making any major decisions. Otherwise, you risk losing your sudden fortune.
A financial advisor can help you determine how to best use your cash windfall to accomplish your goals. Whether it’s investing a portion of it in the stock market or paying down debt, you want to make the right decision for your money.
4. There was a death in the family
If you have had a death in the family, you made need the help of a financial advisor to help you manage your relative’s estate.
There can be significant issues and tax implications that come along with probate or inheriting money. Having a financial planner help you through this tough time can alleviate some of the financial burden.
5. You’re drowning in debt
If you are drowning in debt, a financial planner can help you develop a plan to recover. But you don’t need to necessarily pay an advisor in this situation. You can get free or discounted assistance through the National Foundation for Credit Counseling or local nonprofit agencies.
Financial advocates will work on your behalf to negotiate with your creditors. This can help reduce your balance or lower your interest rates. They’ll also help you develop a budget and a payoff plan to get your debt under control.
When you don’t need a certified financial planner
If you’re still wondering, “Do I need a financial advisor?” there are times when it doesn’t make sense to hire someone.
Financial advisors can be expensive, so if you’re short on cash — but are managing your expenses — you probably don’t need their help. If you’re single or married and don’t have children, you can probably handle your finances and retirement planning on your own.
If your financial situation becomes more complicated, you can consider hiring a financial advisor later on. Alternatively, you can retain one only for major life changes.
“Finding a good advisor who has your best interests in mind will always be [helpful],” says Janota. “It can’t hurt to talk and plan, but it sure as heck can hurt if you don’t.”
Managing your finances is complex. While you may handle situations on your own, there are some occasions where professional financial help can be very useful. They can help you navigate pitfalls and plan for what’s ahead, hopefully even saving you money in the long run.
For more information about planning for the future, check out these 19 retirement terms you should master.
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