How a Financial Advisor Can Help You Achieve Your Financial Resolutions

As the calendar turns to a new year, many of us begin a journey of self-improvement, setting resolutions that often focus on health, career, and personal development. Yet, amidst these common goals, there lies an equally important, albeit sometimes overlooked, resolution: financial health. For many, the new year sparks a renewed dedication to achieving financial stability and prosperity, whether it be through saving more, spending less, or investing wisely.

However, as familiar as the ritual of setting these financial resolutions may be, the challenge of adhering to them remains a significant hurdle. While our intentions start strong, the reality of daily life, unexpected expenses, and a lack of clear strategy often lead to these financial goals quietly slipping away as the year progresses. It’s a cycle familiar to many: great financial ambitions at the start, followed by dwindling focus and motivation. This is where the guidance of a financial advisor can transform good intentions into tangible outcomes, providing the expertise and accountability needed to not only set realistic financial goals but also to stick to them throughout the year.

This article discusses the role financial advisors play in helping you achieve your financial resolutions and whether you need their assistance or not.

What is a financial advisor?

In simple terms, a financial advisor is a professional expert in money management. They offer personalized guidance on various financial matters including savings, investments, taxes, and retirement planning. Their role is pivotal in helping individuals and businesses strategize and reach their financial objectives.

Financial advisors come with varying skill sets and credentials. Among the most common are Certified Financial Planners (CFPs), who specialize in comprehensive financial planning, covering everything from budgeting to estate planning. Wealth managers, on the other hand, primarily cater to clients with significant assets, focusing on investment strategies and wealth preservation. Then there are robo-advisors – the tech-savvy alternative, offering automated, algorithm-driven financial planning services with minimal human supervision. These digital platforms are ideal for those comfortable with online tools and looking for lower fees. If you are looking for a financial advisor, assessing your unique financial situation and budget for financial advice may be the ideal starting point.

An essential aspect to consider when choosing a financial advisor is whether they are a fiduciary. A fiduciary is legally obligated to act in their client’s best interests. This means they must put their client's needs ahead of their own profit, ensuring recommendations made are based solely on what's best for the client, not what might generate the highest commission for the advisor. This distinction is crucial as it guarantees the advice received is unbiased and aligned with your financial goals. This adds an extra layer of trust and security in the client-advisor relationship.

The role of financial advisors in achieving financial resolutions

The expertise of financial advisors spans various aspects of financial planning, making them an invaluable resource for those looking to turn their financial aspirations into reality. They act as both strategists and coaches who help devise effective financial plans and also provide the motivation and accountability needed to stick to these plans. Their guidance can be the difference between abandoned resolutions and achieved financial success.

Below are 5 ways in which they can help to achieve your financial resolutions:

1. Setting and prioritizing financial goals

One of the primary roles of a financial advisor is to help you clearly define and set achievable financial goals. Whether you are aiming to save for a down payment on a home, planning for a comfortable retirement, or setting up a college fund for your children, a financial advisor can provide the roadmap to get you there.

Advisors play a critical role in helping clients identify and articulate both their short-term and long-term financial objectives, ensuring these goals are realistic and attainable. Further, they help in breaking down these seemingly daunting goals into manageable steps, making them more achievable. Another important aspect that they focus on is prioritizing the goals based on importance, urgency, and feasibility.

Imagine Sarah, a 30-year-old professional looking to balance her immediate need to pay off student loans with her long-term aspiration of owning a home and securing a comfortable retirement. If Sarah decides to hire a financial advisor, they can help her map out a plan that includes a realistic budget. This will allow her to allocate funds towards her student loan debt while simultaneously contributing to a savings account for a home down payment. The advisor will also work with Sarah to set up a retirement savings plan.

This comprehensive approach that Sarah may lack if not for a financial advisor, will ensure that she doesn't neglect her long-term goals while addressing her immediate financial concerns. This way she can strike a balance between her various objectives, adjusting the plan as her circumstances and priorities evolve.

2. Creating and adjusting budgets

A well-crafted budget is the cornerstone of sound financial management. The amount of thought, planning, and foresight that goes into the budget can play a crucial role in its efficacy. Financial advisors can help with the creation and ongoing adjustment of budgets, ensuring they align with both your current financial situation and your future goals.

Creating a budget involves more than just tracking income and expenses. It's about understanding your financial habits, recognizing opportunities for savings, and identifying areas where spending can be optimized. A financial advisor helps in this process by providing a detailed analysis of your financial data, offering insights that you might overlook when managing finances on your own.

More importantly, advisors recognize that life is dynamic, and what works today may not be suitable tomorrow. Hence, they are instrumental in adjusting your budget as your financial situation evolves.

3. Building emergency savings

The importance of an emergency fund cannot be overstated in any sound financial plan. This fund acts as a financial safety net, designed to cover unexpected expenses such as medical emergencies, urgent home repairs, or unforeseen unemployment. Without it, individuals are often forced to resort to high-interest debt options, which can derail even the most meticulously planned financial strategies.

Financial advisors guide the establishment and management of emergency funds. They begin by helping clients understand the significance of such savings, breaking down the potential risks and scenarios where these funds could be vital. A common guideline is to have enough to cover three to six months' worth of living expenses, but this can vary based on individual circumstances.

Advisors assist in determining an appropriate target amount for the emergency fund, considering factors like job stability, health, and monthly expenses. They then devise a realistic and achievable plan to build this fund. This often involves creating a budget that allocates a portion of monthly income to the emergency fund, without compromising other financial goals. As life changes, financial advisors also help in reassessing the adequacy of the emergency fund. For instance, if you switch to a higher-paying job or reduce monthly expenses, the advisor might recommend increasing the emergency fund accordingly.

Moreover, financial advisors can offer advice on where to keep these emergency savings. The ideal location is often a liquid account, like a high-yield savings account, where the money can earn interest but remains easily accessible without incurring penalties or significant fluctuations in value.

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4. Managing and reducing debt

Can a financial advisor help with debt? This is a common question that people ask.

Effectively managing and reducing debt is a common financial challenge, and it's an area where financial advisors can provide invaluable assistance. Advisors bring a wealth of knowledge and experience in devising strategies to tackle debt, helping clients regain control over their financial lives.

The first step in debt management is often a thorough assessment of all outstanding debts. This includes understanding the amounts, interest rates, and terms of each debt. A financial advisor helps in prioritizing these debts, often recommending focusing on high-interest debts first, such as credit card balances, to reduce the amount paid in interest over time.

One popular strategy in debt management is consolidation. This involves combining multiple debts into a single loan, typically with a lower interest rate. Debt consolidation simplifies the repayment process and can result in lower monthly payments. Financial advisors can assist in evaluating whether this approach is suitable for a client’s specific situation and can guide in finding and securing the best consolidation loan options.

Another common method is balance transfers, particularly for credit card debt. This involves transferring balances from high-interest credit cards to one with a lower interest rate, often a card offering a 0% introductory APR. Advisors can help navigate the specifics of such offers, ensuring clients understand the terms, including any transfer fees and the duration of the introductory rate.

In addition to these strategies, financial advisors often work with clients to develop a budget that accommodates debt repayment while still working towards other financial goals. They can also provide advice on lifestyle changes or spending habits that can free up additional funds for debt repayment.

It's important to note that while these strategies can be effective, they require discipline and a commitment to a broader financial plan. This is where the ongoing guidance and support of a financial advisor become crucial. They not only help in formulating a debt reduction plan but also provide the accountability and advice needed to stick to it.

5. Creating a suitable retirement plan

Retirement planning is a critical aspect of financial management, and financial advisors are instrumental in guiding clients through this complex process. Their expertise helps to ensure that individuals are well-prepared for their post-work years, both financially and strategically.

Financial advisors begin by assessing a client's current financial situation and future retirement goals. This includes understanding their desired retirement age, lifestyle expectations, and any potential income sources during retirement, such as Social Security or pensions. Based on this, they develop a personalized retirement plan that aligns with the client's goals and risk tolerance.

A key part of retirement planning is choosing the right retirement accounts. Advisors are well-versed in the various options available, such as 401(k)s, Individual Retirement Accounts (IRAs), Roth IRAs, and other tax-advantaged savings plans. They help clients understand the differences between these accounts, including contribution limits, tax implications, and withdrawal rules, guiding them to make informed decisions on where to allocate their retirement savings.

Investment strategy is another critical element of retirement planning. Advisors assist in building a diversified investment portfolio tailored to the client's timeline and risk tolerance. This might include a mix of stocks, bonds, mutual funds, and other investment vehicles. As clients approach retirement, advisors often recommend adjusting their investment strategy to focus more on preserving capital and generating income, rather than aggressive growth.

Financial advisors also continuously monitor and adjust retirement plans as needed. Life changes such as a career shift, health issues, or changes in family circumstances can all necessitate revisions to the retirement plan. Advisors help ensure that the plan remains flexible and adaptable to these changes while keeping the client on track toward their retirement goals.

Do you need a financial advisor to achieve your financial resolutions?

The decision to hire a financial advisor is a significant one, and there's a common misconception that such services are only necessary for the wealthy. In reality, financial advisors can provide valuable guidance to individuals and families at various income levels and stages of life. Have you also been wondering ‘How can a financial advisor help you’?

One of the key scenarios where a financial advisor can be particularly beneficial is during major life changes. This includes events like getting married, starting a family, receiving a large inheritance, or approaching retirement. During these times, financial complexities often increase, and having expert advice can help ensure that you make sound decisions that align with your long-term financial objectives.

Starting a business is another instance where a financial advisor's expertise can be invaluable. Entrepreneurs face unique financial challenges, from securing funding and managing cash flow to planning for taxes and setting up retirement accounts. A financial advisor can provide strategic guidance on these matters, helping to lay a strong financial foundation for the business and its owner.

They can also assist in areas like investment management, tax planning, and estate planning and thus provide a holistic approach to managing your finances, ensuring that all aspects are working together efficiently towards your overall financial objectives

It's also important to address the belief that financial advisors are only for the wealthy. While it's true that some advisors cater specifically to high-net-worth individuals, many offer services that are accessible to people with a wide range of income levels and financial needs. The rise of robo-advisors and online financial planning services has further democratized access to financial advice, making it more affordable and convenient for a broader audience.

Thus, anyone who seeks to optimize their financial situation, navigate complex financial decisions, or simply gain a better understanding of how to achieve their financial goals can benefit from the services of a financial advisor. Whether you're just starting your career, building a family, or nearing retirement, a financial advisor can provide tailored advice and strategies to help you realize your financial aspirations.

To conclude

The journey toward achieving financial resolutions is often challenging, but with the guidance of a financial advisor, it becomes more navigable and realistic.

As we look towards the upcoming year, it is an opportune time to reflect on our financial aspirations. Whether these goals are centered around saving for a significant purchase, managing debt, planning for retirement, or simply creating a more robust financial plan, a financial advisor can offer the tailored advice and strategies necessary to achieve them.

The key success of a financial advisor extends beyond mere numbers and investment returns. It lies in their ability to provide peace of mind, clarity, and confidence in your financial decisions. Their role in helping navigate life's financial complexities and uncertainties cannot be overstated.

If you are also thinking of hiring a financial advisor, consider using our free advisor match service which can help match you with vetted advisors who can help you stick to and attain your financial resolutions. Simply answer a few questions about your financial needs, and our matching tool can connect you with 2 to 3 advisors who are most suitable for meeting your financial goals.