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Here’s When You Should Hire A Financial Advisor (And How Much It Costs)

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If you’ve thought at all about your financial future, you might be wondering how to create a long-term plan to reach your goals ― and stick to it.

A financial advisor ― the umbrella term commonly used to refer to financial planners, though it includes other financial professionals as well ― could be just the person to help. But before you scoff at the idea, know that working with a financial advisor is not as cost-prohibitive as it once was. In fact, it could be time you hired one.

Financial planning services are more accessible than ever thanks to fee-based payment models.

“So many people feel that they don’t have enough money for a financial advisor,” said Angela Moore, owner of Modern Money Advisor in Miami. “The industry has promoted this fear by primarily focusing on high-net-worth clients who, generally speaking, have at least $1 million in assets to invest.” As payment for their services, financial advisors will charge these types of clients around 1 percent of assets under management, or total portfolio value, each year. So a $1 million portfolio, could require an annual fee of $10,000. That’s usually in addition to hourly work.

The good news, according to Moore, is that there is a growing number of financial advisors who provide fee-based rather than asset-based payment models, which can take the form of a monthly retainer, hourly rate or flat rate, depending on the service. This opens the opportunity for people of varying backgrounds and income levels to seek professional financial advice they can actually afford.

“The financial field has expanded a lot,” said Britton Gregory, certified financial planner and principal of Seaborn Financial in Austin, Texas. Over the last several years, he explained, there’s been a rise in financial planning networks that focus on nontraditional markets ― in other words, “people who don’t have gobs of assets sitting around in investments,” Gregory said.

In fact, many financial advisors these days offer low-cost consultations that can help clients get pointed in the right direction, even if they don’t have the income or assets for more comprehensive portfolio management. For instance, Gregory offers “office hours” during which prospective clients can book a 90-minute video conference to discuss their questions and come up with action items. The service costs $450.

Of course, that’s nothing to sneeze at. But for someone who can’t afford to pay several thousand dollars for a comprehensive financial plan, it could be well worth gaining some professional insight.

Not sure if you’re ready to ditch the DIY route and work with a professional? Here are five signs it’s time.

1. You’re young and not sure where to start.

According to Bradley Nelson, president of Lyon Park Advisors in Rossville, Indiana, a good financial plan makes the most difference when adopted early in life. That’s because it’s much easier to start investing 20 percent of your income when you’re young and want to retire in 40 years than to start saving 50 percent of your income when you’re older and want to retire in 15 years.

Young people with their first “real job” and salary stand to benefit most from good financial planning, Nelson said. “Investments scale surprisingly well. There’s really not much a person needs to do differently with a $100,000 portfolio than a $10,000,000 portfolio.”

However, young adults who don’t yet have much money to their name ― and might even be working on paying off debt ― should be sure to work with the right type of planner. “They may have to seek out a planner who works on fixed retainer rather than on a percentage of assets,” Nelson noted. An hourly fee-based planner is also a good option.

2. You experienced a major life event such as graduation, marriage or having kids.

Any time a major life event occurs, there is a financial impact. For instance, getting married means merging finances with your partner. Having a child means you have to plan for their future education costs.

“I believe that looking for professional financial help should be based on life events and personal comfort level rather than any particular level of assets or income,” said Mike Zung, the owner of Java Wealth Planning in Lee’s Summit, Missouri. He said that even someone who has just graduated from college and landed their first job would benefit from personalized help with debt management, budgeting tactics and basic advice on their company’s 401(k) plan.

“Typically speaking, the life events just keep coming from there. Marriage, buying a home, starting a family, changing jobs, kids going to college ― all these have financial implications and would benefit from unbiased financial planning,” Zung said.

3. You just can’t find the time to manage your money on your own.

Another reason to work with a financial advisor is because you don’t have the time (or know-how) to critically examine your financial life and put a plan in place.

“I’m working with some of the smartest people in the world, but unless they make time to look at their finances, things could be overlooked,” said Kayse Kress, a certified financial planner merging her firm with Physician Wealth Services, a financial planning firm based in Las Vegas that specializes in assisting medical professionals.

“No matter how smart or how much money you have, sometimes money just isn’t your thing. A financial advisor can help you create a road map to keep your financial life on track,” said Kress.

4. Financial issues keep you up at night.

If you’re staying awake each night, worrying about issues like cash flow, saving for a goal, covering loan payments or a change to your family situation, it’s time to reach out to a professional financial planner, said Louise H. Bryant, a certified financial planner and owner of the firm Financial Spyglass.

“We aren’t born with this knowledge. While all of us are capable of figuring it out, working with a financial advisor can get you on the best track fastest,” Bryant said.

5. You have at least $500,000 in assets and want a comprehensive plan.

Finally, if you do have quite a bit of money saved and you want ongoing help managing and growing your wealth, a more traditional financial planner could be a great fit. “If you have at least $500,000 in assets, you should have little problem finding a financial planner who will advise you for a percentage of [assets under management],” said Gregory.

How to choose the right financial advisor

Clearly, there are a lot of options out there when it comes to hiring professional financial help. But when it comes to finding the right person, how do you even start?

Figure out what you can afford, then find the best match through a financial planning network.

Whether you want to get a basic plan in place or hire someone to provide ongoing guidance, working with a financial planner can be a smart move. However, the cost to hire a professional has a pretty wide range, depending on the financial advisor.

It’s common to pay anywhere from $500 to $2,500 for a full financial plan from a traditional financial planner, and 1 to 2 percent of assets under management for ongoing portfolio management. Hourly fees for ad hoc consulting (such as estate or tax planning) or special projects can typically range anywhere from $100 to $400.

To find a financial advisor that meets your needs and budget, it can be helpful to take advantage of financial planning networks. The Garrett Planning Network, XY Planning Network and Alliance of Comprehensive Planners all offer online tools that let you search for advisors based on location, specialty and more.

Make sure the financial advisor is a fiduciary.

You also want to be sure that the person you work with has your best interests at heart. “Hiring the wrong professional could be a costly mistake,” said Nelson, noting that at minimum, the financial advisor should be a fiduciary who is legally required to put the client’s interests first.

“Many planners and brokers who aren’t fiduciaries work on commission and are in business to sell you whatever makes them the most money,” said Nelson. It’s for that reason that you should look for someone who is fee-only, meaning they don’t make money from commissions or by selling products. You might also want to look for financial advisors with professional designations, such as a certified financial planner.

Or visit an accredited financial counselor.

If you aren’t so much interested in putting together a comprehensive financial plan as getting some basic personal finance advice, you might benefit from working with an accredited financial counselor instead. AFCs are certified by the nonprofit Association for Financial Counseling and Planning Education and can help you navigate confusing financial issues such as budgeting, paying off debt and saving for retirement. They’re not allowed to give you specific investment advice, but they can help you with gaining financial literacy.

AFCs often focus on working with middle- and low-income clients, so you might find this option to be more affordable than hiring a financial planner. You can visit the AFCPE website to search for a counselor near you.

If your goal is to find budget-friendly, no-frills portfolio management, a robo-advisor might be the best choice for you. These automated investment management services, which employ algorithms that choose your investments based on a few personal factors and then manage them with little human oversight, charge around just 0.25-0.5 percent of your portfolio value annually. Popular robo-advisors include Betterment, Wealthfront and Personal Capital.

No matter what type of financial advisor you choose, the point is that professional financial help is more accessible ― and more important ― than you might think. “Everybody should have a financial plan that articulates their financial goals and describes in detail how to meet them,” said Nelson. If you can’t prepare one yourself, it’s probably a good idea to hire a professional to do it for you.

For one, it takes quite a bit of time to stay up to date on the latest developments in areas such as investing and taxes. Plus, it takes discipline to stick to a plan. “There are also strategies to optimize your spending, saving, giving and investing that many people won’t think of without experienced assistance, or at least without spending a lot of time doing independent research,” said Nelson.

So don’t write off financial planning as a privilege reserved only for the wealthy. There are plenty of financial advisors out there who specialize in working with clients who don’t have a ton of money ― yet. The goal is that by working with one, you’ll put a plan in place today that ultimately gets you to the next level.

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4 things kids need to know about money

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(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity

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Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from CreditCards.com. That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to CreditCards.com industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard

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Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of taxvanta.com, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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