Welcome to the future! Investing isn’t just for Wall Street anymore. Now, with advances in technologies, you can plan and manage your investments on your own. But should you? Let’s check out the details so you can decide what’s best for you.
What Are Financial Professionals and Do I Need Them?
Financial professionals are people who – after taking your financial goals into consideration – offer advice on when and where you should invest. But, of course, they do this for a fee. While it varies, most financial planners are going to cost you between $1,000 and $2,500 to develop a comprehensive plan for your money. Think of this as a map of where you need to be financially. And if you’re planning on talking with a financial advisor regularly, it will probably cost you a couple of hundred dollars a month.
There are also fee-only investment advisors, who charge around 1 – 2% of your invested assets to help guide you and your portfolio. This, in a lot of ways, is a great option because it gives the advisor a lot of incentive to make money for you. The more you make/invest, the more they make.
The Benefits of a Financial Professional
While the downside of hiring a financial professional is the cost, they do offer quite a few perks:
- They can deal with the complicated. Once you start accumulating wealth, your financial life can become tricky. For instance, what should you do if you’ve just inherited money? Does it make sense to pay off your debt faster or invest? Are you investing at the right pace to meet your goals? The list goes on. Financial professionals have the training to keep you on track.
- They provide you with a step-by-step guide. Since financial professionals deal with managing wealth accumulation and retirement funds, they know how to help you best achieve your goals. This roadmap allows you to have some peace of mind about your financial future.
- They aren’t emotionally attached. Emotions are often the biggest threat to a person’s finances. When they see the stock market drop, some people tend to panic and immediately sell, which can be a textbook case for disaster. A financial professional is not as close to your money as you are. This unbiased third-party opinion can allow them to make fact-driven decisions.
- They’re experienced. There’s a pretty good chance that a financial professional knows more than you when it comes to financial planning. After all, that’s their job.
Investments for DIY-ers
If you still want to plan your own finances, specifically your investments, there are still some great options for you. Take a look at this list of what you absolutely need to do before getting started:
- Have a budget. If you’re going down this road yourself, you have to have a good grasp of what’s happening with your money. And that means you need a budget. You can get started with a free budget on com, which has great options for setting and keeping track of your spending. It also allows you to set financial goals for yourself.
- Check out a retirement calculator. Before you start to think about your investments, you should consider how much you need for retirement. Take a look at this handy retirement calculator to see how much you need – and more importantly – how much you need to save to get there.
- Invest in your 401(k). If your place of work offers to match a certain amount of contributions to your 401(k), you should start investing there. For example, let’s say your job gives you $.25 for every $1 you invest up to $2,500. That’s a chunk of change! Before you invest anywhere else, start by collecting this free money.
- Other Retirement Accounts. You should also look at Roth IRAs and Traditional IRAs, which are also great retirement options for protecting your investments.
- Alternative Investments. Beyond the stock market, take some time to think about other investment opportunities. This could be an investment in real estate or perhaps something more unique.
Playing the Stock Market
For those who want to get a little more hands-on with the stock market, there are several apps to help you get your feet wet. First, I recommend trying the app Robinhood, which allows you to make free trades. This is an amazing perk, especially if you’re new to the game.
You could also try Acorns.com, which links to your checking account and then automatically rounds up your purchases to the nearest dollar. This money is then invested without you touching it. It’s a beautiful cross between a money-saving tool and a robo-investor. They’ve also got pretty low fees, with accounts under $5,000 only costing $1 a month to run (and college students can get up to four years free).
Making Your Decision
When you’re trying to decide if you need a financial advisor at your side, make sure you take a look at the big picture and analyze your personal strengths. Some people are much more interested in the results than the process. If you fall into that category – then by all means, look at your options for an advisor. But if you want to get up close and personal with your finances, you may try to go at it yourself. In the end, though, it might make the most sense for you to do a bit of both. You could meet with a financial professional and then use their advice and manage it on your own.
Do you have other tips for managing your investments? Let us know in the comments below!
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.