We don’t want someone whose primary interest is to see how much money we could spend on his or her products. We make very good money, but seriously live from paycheck to paycheck, always robbing Peter to pay Paul. We have some serious debt and don’t know how to begin to get from under it. We’re lost, and it’s getting darker.
A: I believe that it helps to hire a financial planner to help you clarify your financial goals. But, you need to understand what an adviser really does. Some may help you develop a budget; but a planner—a good one—will mostly help you look at your big financial picture—your debts, taxes, retirement savings, college savings for your children, estate planning and insurance needs.
One of the best ways to find a financial planner is to ask around and get recommendations. Find someone in your circle who has used a planner. You can also find a planner through the Financial Planning Association. To find a fee-only planner, you might first check with The National Association of Personal Financial Advisors (or call 800-366-2732), which is the professional association of fee-only financial planners. You can also check with the Certified Financial Planner Board of Standards, Inc. (or call toll-free at 888-237-6275).
For a basic financial plan, you might pay about $800 to $1,200. Some planners may charge less; but either way, you’re talking about an outlay of some cash for a plan if you decide to hire a financial adviser that charges by the hour. Financial advisers earn their money in a variety of ways. Fee-only planners don’t earn fees or commissions on the products, investments or recommendations they make. Instead, they are paid an hourly fee, annual retainer or percentage of assets managed.
Planners can be paid on commission. There is no charge for the planner’s advice or preparation of a financial plan, but they are paid based on selling you certain financial products. Of course, you have to be careful about advisers that are paid based only on what they sell to you. You could be steered to higher-cost products that generate higher commissions. Planners can also be paid a fee and commission.
Whichever way you go, just be sure you fully understand how your financial planner is paid.
But, here’s the thing. Right now, what you need is someone to help you budget and set up a debt repayment plan. You have to be sure you have the money to invest and pay your bills. You need to build up an emergency fund. You need to stop living from paycheck to paycheck; otherwise you are investing money you can’t afford to lose.
You may not need a financial planner right now. Instead I would recommend you go to the National Foundation for Credit Counseling and talk to a credit counselor working for a nonprofit credit counseling agency. You certainly need to invest and assess your insurance needs, etc. You should be saving for retirement, and a financial planner can help you do that. However, you have to first get a handle on your budget. The expertise you need right now is someone who can help you stop living paycheck to paycheck and use that good money you are earning to plan a better financial future.