When does it make sense to hire a financial advisor

When Does It Make Sense To Have A Financial Advisor?

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When it comes to money and personal finance, chances are that you feel inadequately prepared to handle everything. And it’s not your fault. Schools don’t teach the financial skills we all need to navigate ‘real life’. So unless your parents are experts, chances are you weren’t taught nearly enough personal finance skills.

To be 100% honest with you, I didn’t know what a 401K was when I started working. I also didn’t start funding my Roth IRA until two years after I started earning money because I didn’t realize what I was missing out on. And this was after spending 4 years at the best finance program in the world.

In reality, personal finance often seems like a DIY project. You read the directions online, maybe watch a few videos, read some articles and then venture out on your own and hope you don’t make mistakes. The difference between a DIY home project and your money is that the stakes are a lot higher when it comes to your finances. And making a mistake can set you back several years.

The Basics Of Personal Finance Are Easy To Understand

The honest truth is that the basic concepts of personal finance are extremely simple.

  1. Spend less than you make.
  2. Take advantage of retirement accounts.
  3. Save as much as you can and maximize your income.

Heck, simply making a budget and sticking to it is half the battle.

A lot of personal finance sites like my own lay out everything you need to do in detail. Yet, I still get daily emails from readers asking for help. They feel stuck under a mountain of debt, unmotivated by a low salary, or overwhelmed by all of the information out there.

Even Though The Basics Are Simple, The Amount Of Information Out There Makes Things VERY Confusing.

When you Google the phrase ‘how to budget’, over 1.7 billion search results are returned. It’s hard to even wrap my mind around that number. No wonder you feel lost.

I regularly receive emails from readers who feel stuck, unmotivated or lost. My response to them is usually the same. I reiterate the basic steps outlined above and explain how they need a budget and to try to increase their income. But for a lot of people, understanding the steps isn’t enough.

A lack of confidence or understanding of the topic is enough for some people to want to avoid it altogether. Not everyone loves personal finance. They might know it’s important but they don’t enjoy it. They don’t enjoy learning about it, reading about it, or even thinking about it. Or maybe they already have so much going on and just don’t have time for financial planning.

Don't Neglect Your Finances Out Of Fear.

But the funny thing is that when you have health problems, you visit the doctor, or the dentist when your tooth is bothering you, but when you’re hurting for money you internalize the despair and feeling of helplessness. Even if you want to seek help, a lot of people out there will tell you paying a financial advisor is a waste of money.

The steps to effective financial planning are relatively simple. So why pay to have someone help you manage your money? Using that line of thinking, why would you ever pay for eggs at a diner or restaurant? The steps to making eggs are pretty simple. Heat a pan, add some oil or butter, crack an egg and voila. If you want it to have a more robust flavor just add more butter, salt and pepper. No need to pay someone else to do that for you.

Or just maybe, you still order eggs or a sandwich because someone else is less likely to make a mistake preparing the eggs for you. Or because you have a finite amount of time and don’t want to spend it frying an egg at that moment. Maybe cooking just isn’t fun for you.

I am not here to vouch for the financial planning world, but rather reflect on the oft-expressed philosophy that there’s no place to pay for financial advice unless you’re mega-rich. In truth, the industry is being transformed by upstarts who charge modest fees and eschew commissions in order to better align incentives between advisor and client. Companies like Facet Wealth come to mind.

We Always Recommend Facet Wealth To Those Who Need Help

We recommend Facet Wealth to our personal friends and family who ask us for advice finding a financial advisor. Actually. And guess what? They couldn't be happier to finally be able to sleep at night knowing they aren't making financial mistakes doing it on their own.

Traditional financial advisors charge a percentage of assets managed which leads them to only seek and serve high net worth clients. Facet Wealth leverages technology in order to serve low net worth clients. Does this mean that everyone should be hiring a financial advisor-as-a-service firm? Not exactly.

If you are earning minimum wage and have a lot of student loans to pay off, you’ll need to save every penny you can in order to make ends meet. But if your household income is $70,000+ or you have over $50,000 saved, it could make sense to take a closer look if you don’t feel confident investing and managing your money.

Regardless of how you ultimately navigate your financial journey, it’s important to remind yourself that very few people feel 100% confident in managing their money, and that includes those with finance degrees.

If you're ready to feel less financial stress, schedule a free informational call with Facet Wealth.

Camilo Maldonado

Camilo is a personal finance expert who was raised in poverty by a single mother and had to learn everything about personal finance on his own. In addition to running The Finance Twins with his twin brother, he has been featured on ForbesBusiness InsiderCNBCUS NewsThe Simple Dollar and other top publications. Camilo began his career as an investment banking analyst on Wall Street at J.P. Morgan. He has a master of business administration (M.B.A.) degree from Harvard University and a Bachelor of Science in finance from the Wharton School of Business at the University of Pennsylvania. You can contact Camilo here or via Instagram @thefinancetwins.

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