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10 Times You Need To Talk To A Financial Advisor

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If you are confident about managing your finances by yourself and if you understand the nuances of financial planning such as filing taxes, choosing investments, saving for retirement, and more, there is a good chance you may not require the services of a financial planner. However, financial management may require time and effort to ensure that your initial plans are still on track, along with the surety that your financial goals are progressing well. Therefore, getting in touch with a financial advisor is never a bad idea.

Additionally, if you lack time and sufficient financial knowledge to manage your finances yourself, reaching out to a financial advisor may be the right step for you. The advisor can help you pick the right investments, manage your taxes, consolidate your debt, and create a retirement plan for you. Consider hiring a financial advisor as an investment rather than an expense.

Read further to know when you should talk to a financial advisor. 

What are the situations wherein you should approach a financial advisor?

1. You are new to the investing world

If you're new to the investing world, it's important to talk to a financial advisor about how best to invest your money. Discuss about your short-term and long-term financial goals, risk appetite, and savings goals. Advisors can help you select the right investments and manage them as they grow over time. They can also help determine whether or not a particular investment strategy is appropriate for you based on your risk tolerance and time horizon (short-term vs long-term). Lastly, they can help keep an eye out for any scams or frauds that you may be vulnerable to and protect you from the same.

2. You have recently gained employment

If you are starting a new job and need help with money management, saving, and investing, you may consult with a financial advisor. You can also seek guidance on how to use your income effectively on discretionary expenses (such as eating out, online subscriptions, etc.) and non-discretionary expenses (rent, gas, groceries, etc.). (The advisor can also guide you on how to strike a balance between your expenses, savings, and investments. For instance, If you get a promotion at work, your 401(k) contributions may alter, including your savings. Similarly, if you plan to switch your job, or move to a new state for the same, your financial advisor can help explain the effect of ensuing state taxes on your income and lifestyle.

3. You need assistance in managing your taxes

You may need to consult with a financial advisor if you require help managing your taxes. Taxes are a large part of personal finance. It is paramount that you understand the amount of taxes you would be paying, what deductions and credits are available for you, etc. You also need to understand the state tax laws and their impact on your life.

Your financial advisor can help guide you through this process by helping you file your taxes, creating tax-efficient strategies, explaining different types of tax deductions and credits, and more.

4. You have inherited a large estate or a huge sum of money

Inheritances can be a messy affair. A financial advisor can advise you on various legalities, processes, taxes, etc., associated with an estate. An advisor has to stay up-to-date about the different policies on inheritance and estate. Doing this yourself can be quite taxing, and there is a high possibility that you may miss out on critical aspects in the absence of an advisor. You may speak to your advisor if you have inherited an estate or a large amount of money. They can help you plan your resources and how best to protect your inheritance.

5. You have quit your job

Quitting a job can be harrowing mentally. If you've quit your job, it's vital that your finances are in order. You should speak with your advisor about how best to handle this situation and what steps need to be taken. Some of the measures that you can take to safeguard your future in the short-term are:

  • Ensuring your emergency fund can last at least 6 months from when you quit
  • Making sure your investments are transferred over from your old employer's 401(k) plan
  • Planning for contributions to IRAs and retirement accounts moving further
  • Ensuring taxes have been filed on time or corrected before the end-of-year deadline (this is important because if tax returns are filed late or not filed at all, there could be penalties associated with them).

6. You are planning to start a new business or take on a freelancing gig

If you are starting a new business or have an idea for one and need advice on how to proceed, you may schedule a meeting with a financial advisor.  They can help come up with a business plan, set up meetings for finance or search for possible avenues where you can receive funding at favorable rates. Furthermore, they can help sort out complex rules and regulations associated with the plan. For instance, the taxation rules for self-employed individuals are different from others, and the filing requirements vary too.

Similarly, if you want to take on some freelancing work while being employed or post-retirement, remember that additional income can mean additional taxes. You may need a financial expert to guide you through options to retain your liquidity while minimizing your tax output.

7. You are saving for your children’s higher education expenses

With the rising costs of college education, it may be advised to start a savings plan to fund your child or grandchild’s education. It is estimated that the cost of higher education tends to increase at about two times the rate of inflation each year. This is likely to continue for the coming future. You may require professional help to save and manage your child’s college costs.

There are some tax-advantaged options that you can consider. You can go for a 529 plan or even use a traditional or Roth IRA to pay for college expenses. A 529 college plan is a tax-advantaged investment instrument that allows families to save for the future college costs of their child. Moreover, you can consider using your retirement plans to pay for college tuition if it comes under the purview of qualified education expenses. If not, you may have to pay a 10% penalty on the amount withdrawn by you.

8. You are planning to get married or going through a divorce

If you are planning a marriage or going through a divorce, it is important that you speak to an advisor about your finances. The advisor can guide you on potential changes in your life and how they can affect your family's finances. Also, professional advice on alimony, prenup, child support, and asset split is paramount for ensuring a healthy financial life along with your familial life. For instance, when you're getting married or divorced – if one spouse has more assets than the other, this could mean that he or she could have the bigger say on how those assets should be used (or not). This could breed ground for arguments, and in some cases, even legal battles.

So, whether getting married or filing for a divorce, professional guidance on matters of finances affecting personal relationships can effectively help deflate pressure.

9. You are planning for retirement

If you're planning for retirement, it's important to start thinking about how much money you'll need in order to live comfortably when the time comes.

There are various retirement accounts one may set up with varying rules of taxation as well as withdrawal. Contribution limits vary too. This can be reasoned out by speaking with a financial advisor who can help guide your investments and finances for the future and discuss what specific steps would be best for meeting your goals.

10. You want to pass on your legacy

If you wish to leave your legacy for the next generation, then you may seek out the services of a financial advisor.

Ideally, you should engage with a financial advisor if you have family businesses, estates, or children and grandchildren looking at college loans and other debt. A good way to determine how much money would be needed by future generations can be done through proper planning. That includes details about who will inherit what when they're older, how much each person will inherit in total, etc.

Also, you will need to address a few questions: Have you prepared a will? Have you nominated your beneficiaries for every single investment you have ever made? How are you planning for business succession? Have you saved enough for retirement? A financial advisor can help guide effectively for the aforesaid matters.

Is professional advice meant only for the rich?

The answer to 'Do I need a financial advisor?' will always depend on your personal circumstances and requirements. But, contrary to popular opinion, you do not have to be wealthy to benefit from engaging a financial advisor. Not everyone has the requisite knowledge, time, or resources to manage their taxes, investments, or even plan for retirement. Financial advisors can come help smooth things out in such situations.

Another concern, often tackled by investors, is that hiring financial advisors may be an expensive affair. This is untrue. Various types of financial advisors work at varying rates and fees. Some may work on a commission basis, others on an hourly rate, and some may charge a percentage of the overall wealth they manage (generally 1% of assets under management). Engaging with a financial advisor can be an excellent decision as they can aid in growing your wealth and managing your finances optimally; the fees they charge may become insignificant in comparison over time.

So, are financial advisors worth it? Professional engagement can be worth your time and effort. In the end, whether you're just starting out in life or already have decades under your belt (or both), sometimes, receiving professional advice can make all the difference.

To summarize

The bottom line is that you should always keep a window open for professional engagement when your finances are in question. Seeking professional guidance can be very beneficial when dealing with different financial situations and goals.

Use the free advisor match tool to match with experienced and certified financial advisors who will be able to advise you effectively on how to reach your financial goals. Give us basic details about yourself, and the match service will connect you with 1-3 professional financial fiduciaries that may be suited to help you.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.