An overview of when it’s necessary to hire a financial advisor to guide you through life’s events that can affect your finances.
During your lifetime, some moments impact your finances. When you are going through a life event or planning for the future, a financial advisor can assist you in making decisions about what to do with your money. Experts say a good rule of thumb to hire an advisor is when you can save 20% of your annual income, according to U.S News & World Report.
Financial advisors are professionally trained and bring their expertise to create a financial plan that suits the financial goals you have for your life. Here are five reasons it’s the right time to hire a financial advisor.
1. Planning For Your Retirement Years
A retirement advisor specializes in helping people plan for retirement. When you meet with a retirement advisor, expect to provide details about your entire financial situation, such as assets, investments, real estate, debts, car payments, mortgage/rent, credit cards, student loans, personal loans, and any small business liabilities.
A primary factor to discuss with a retirement advisor is your retirement plans for the future. Do you see your retirement years traveling, living comfortably, or moving to another location? A retirement advisor will gather all of your financial information and plans to draft a report.
After the retirement advisor creates a draft, they develop a detailed financial plan for your retirement, which will help you focus on how much money you can draw monthly. In addition, the amount of money you currently will need to save every month until the time you reach your goals.
When you hire a retirement advisor, they can take you through the various considerations you should be aware of, such as whether or not you should consider converting a traditional IRA into a Roth. Also, if you can minimize taxes that you pay on any other income and assets, including reducing your estate taxes.
2. You Decide To Start Investing
An investment advisor specifically helps people by giving advice, data, and analysis to choose and manage investments. The primary focus of an investment advisor is to handle your investments so you can have a strong investment portfolio. Furthermore, an investment advisor is highly knowledgeable about market patterns.
If your goal is to invest in stocks, mutual funds, and other securities, an investment advisor assesses your financial situation and creates a plan to help you reach your goals. In addition, they provide investment recommendations or do securities analysis.
During your first meeting with an investment advisor, expect to be asked essential questions such as:
- Your current financial circumstances
- Plans for retirement
- Investment objectives
- Risk tolerance
After collecting answers from you, an investment advisor can suggest specific strategies to meet your needs and how to take action. During the year and into future years, communication continues with your investment advisor on the status of your investments and to address any concerns or questions.
3. Just Became A Newlywed
A newlywed couple can benefit from hiring a financial advisor. When you are a married couple starting a life together, it’s important to know your finances and begin the process of financial planning for the future.
A financial advisor can review your current spending habits and savings to understand better where you are financially and how to unify your budget. During the first meeting with your financial advisor, common questions they ask are:
- Do you want to split your bills or combine your finances?
- Are you going to have a joint account for household expenses?
- Do you want to keep your individual accounts?
Your financial advisor can help you by drawing up a plan that works best for you as a married couple based on your spending habits and which one of you has the role of spending and the other of saving money and keeping tabs on monthly bills. Hiring a financial advisor will keep you both on track.
As a married couple, you have future dreams and goals, such as a dream vacation, starting a family, and buying a house or new car. Your advisor can help you grow your money and stay on the road to reaching your dreams.
If you’re starting your newlywed life with debt, A financial advisor can aid you with strategies such as debt consolidation and budgeting to pay off your debt while still having money for current living expenses and the future.
4. You’re Getting Divorced
Going through a divorce is life-changing. A divorce financial advisor can guide you through the financial implications of a divorce. The difference between a divorce financial advisor and a standard financial advisor is a divorce financial advisor has a CDFA and the credentials to work through the splitting of assets.
In addition, your advisor can prepare and help you understand the three areas of divorce such as asset division, child support, and spousal maintenance. A divorce financial advisor understands the difficulties divorce can bring, including emotional, physical, and financial strain.
During the meeting with your advisor, they will discuss with you the value of assets, dividing any property you may have, tax implications of dividing stock options, and the calculation of capital gains from the sale of the home you shared with your spouse.
A divorce financial advisor with a CDFA is highly knowledgeable about critical factors such as asset distribution, tax law, retirement, and financial planning as a newly divorced person. Furthermore, a divorce financial advisor can give you a clear view of how much you should get in a fair settlement.
5. You Suddenly Inherited Money
Unexpectedly acquiring a large sum of money can be overwhelming. Inheriting money can come at a time when there is profound grief from losing a loved one. People who inherit a large amount of money often feel they need guidance on what to do with their inheritance.
A financial advisor can help you make the right decisions with your inheritance. Sitting down when a financial advisor can provide you with advanced knowledge of tax implications. In addition, your advisor will ask what your financial goals are for the future.
Your financial advisor will walk you through every complex rule and tax implication if your inheritance includes a tax-deferred IRA or 401(K) account. Inheritance can be complicated. Financial advisors help you understand your options and how utilizing your inheritance can take you toward financial goals.
A financial advisor will guide you to stay on track and not fall into the hole of overspending your inheritance and losing it all before you know it.
Conclusion
Hiring a financial advisor when going through life’s major events can keep you financially stable and help you avoid making bad and careless decisions with your money. What you need to know before you hire a financial advisor is it’s vital that you find a highly qualified financial advisor who has credentials, is clear about their fees, keeps you on the right track, and is a fiduciary financial advisor.
Your finances are an important aspect of living a comfortable and secure life. When you hire a financial advisor, you will have someone to assist you in financial planning and an opportunity to manage and set your financial goals on the road to achievement.
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