Step 1: Realize You Need Help
You can’t know what you don’t know. There will come a time when you’ve amassed sufficient funds through hard work or possibly inheritance, started or joined a family, or realized there is more to life than work. Suddenly, you realize you want to make sure you’re on track to hit your long-term financial goals – regardless of what they are.
Step 2: Find a Financial Advisor
Fee-Only Financial Advisors:
Fee-only advisors earn money from the fees you pay for their services. These fees may be charged as a percentage of the assets they manage for you, as an hourly rate or as a flat rate. Almost all fee-only advisors are fiduciaries. Generally speaking, they have chosen to work under a fee-only model to reduce potential conflicts of interest.
Financial Advisors Who Earn Commissions:
Some financial advisors earn sales commissions from third parties. Others may charge fees, meaning they derive only part of their income from third-party commissions.
Fee-Based Financial Advisors:
Fee based financial advisors earn money through a combination of fees and commissions. They generally will charge a percentage of the assets they manage for you in addition to earning commissions on products they sell, like investments, annuities or life insurance.
Step 3: Start That Plan
Financial plans are living, breathing things that change with you when your life changes. No longer are they dusty binders full of outdated charts and graphs portraying a moment in time. Now, financial plans are dynamic, current tools that help you model all manner of scenarios today and tomorrow.
Step 4: Use Your Plan
Once built, the plan should grow and change as you grow and change. It will be a useful tool when making key decisions like when to retire or if you can buy a vacation home. It will also provide a benchmark against which you can measure your investment portfolio. Are you taking enough risk? Are you taking too much? Will you have a tax problem in the future or run out of money? Embracing and revisiting your plan on a regular basis creates an invaluable tool.
Step 5: Be Your Own Advocate
Financial planning concepts and practices can be simple, or they can be very complicated. Be sure you find an advisor and work on a plan that suits you and your situation. Be willing to pay for good service, but also be willing to hold your advisor accountable. Be willing to ask questions until you have a thorough understanding of the answer. Expect transparency with regard to fees and performance. Most of all, trust your instinct. If you aren’t comfortable with your advisor relationship, make a change.
