Whether you need help deciding where to invest your money, or simply need help coming up with some money to enable you to invest at all, you may seek the help of a CFP. Most companies have standard requirements for their financial planners, but you should always talk to several planners before choosing one that you want to handle your life savings. When you work with a personal finance advisor, you should receive expert advice on how to invest your money according to your personal goals, attitude and abilities.
Maybe you’ve reached a point in your life where you need financial help in a specific area. If so, you should look for a personal financial advisor who has a lot of experience in that area so you will receive the best advice. You should, however, also look for an advisor who has well-rounded abilities so that in the future the advisor can also help you in other areas. For example, if you want to buy a new home now and need help determining how much you can spend and how to best organize your finances, you should make sure your advisor has information and contact people in the field of mortgages and home loans. But in order for the advisor to give you advice that remains compatible with the rest of your financial life, the advisor needs to be experienced in other areas of your finances. Some common areas of expertise that come in handy include retirement planning, education expenses, insurance and investments.
Before deciding to work with a CFP advisor, you should ask your potential advisor several questions about his or her approach and methods. Ask whether the advisor likes to take risks or prefers to play more conservatively, and compare with your own approach. You can also ask for an estimate of the cost of the CFP services; including not only what you will pay the advisor, but also any financial products that the advisor might recommend. Also, don’t be afraid to question the advisor’s education and certification, so that you can do a background check with the CFP Board.
You will probably start with determining your cash-flow statement and calculating your net worth. A cash-flow statement shows your annual income along with the yearly expenses you have. You can calculate your net worth by figuring out the total value of your assets and subtracting your debts that you owe. After your financial advisor assesses your personal financial needs and discusses your short-term and long-term goals with you, then she will recommend some options in organizing your finances. Some CFP advisors will actually buy investments such as stocks and mutual funds for you, while others only advise you what to do with your money. Most people meet with their financial advisor at least once a year to discuss employment changes, benefit changes and other life changes affecting finances. In the long run, a CFP advisor will try to help you save money so that you can make the best investments and increase your net worth.
If you’re not sure you need a CFP advisor, but you still want some guidance for your financial future, consider getting a software program that will help you organize your finances. These software programs cost less than hiring a personal financial advisor, and you can keep track of all your investments, receive advice in the form of charts and graphs and predict your retirement savings so you can feel confident in your future.
By Lisa Zyga