So, you haven’t seen a financial advisor and are unsure if you want to. The good news is maybe you don’t have to.
Many people will urge you to see an expert in finance to deal with your portfolio, make sure you’re maximizing your investments and plan for the future. It typically helps to have a keen eye to look over the finer details, especially when it comes to money.
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But if you have your own keen eye, you may not even need a financial advisor at all.
GOBankingRates talked to William J. Odom, a financial advisor and CEO of Deerfield Insurance, and Andy LaPointe, speaker, coach and financial advisor, to get their authoritative opinions on the topic of whether you actually need to pay a professional to look at and deal with your finances.
They agreed that you don’t, as long as you can check these critical elements off:
Odom emphasized the importance of a well-articulated financial plan as the foundation of all of your finances. It is comprehensive and specific to your needs. If you can draft a document that includes all of the following, you’re off to a great start:
Budget: Your budget should include all of your income and expenses, as well as savings goals.
Goals: Yes, you want your savings goals to be clearly defined, realistic and measurable.
Investments: Where are you investing? What is your strategy? How do these investments align with your goals?
Tax strategy: You should have a clear plan in place that outlines how you keep your taxes low in your personal income.
Insurance: This section should list your personal and property coverages.
Retirement plan: You should have a complete list of retirement accounts, how much you expect to earn, and how much you save each month to that end.
Cash flow projection: This section must include a prediction of how much cash flow you’ll have on a monthly and annual basis.
Regular evaluation: You want to be able to show how often you evaluate your finances and what your plan is to adapt your finances as life events, incomes and expenses change.
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Odom said that every individual with a strong financial plan in place has short-term spending and investing goals. What are yours? Do you have big trips plans? Sending a kid to college? Buying a house?
Your short-term investments should include money you expect to make in the next one to three years. Are you selling property? Calling in a loan? Getting a big promotion? Write all of these goals down and include rough figures.
More importantly, having solid long-term goals includes items like your retirement plan, your mortgage being paid off, paying off your debt, building an emergency fund, and gaining financial independence. What does that look like for you, and how are you going to get there?
Write it down.
As Odom said, “A well-articulated financial plan with short-term and long-term goals demonstrates financial literacy and independence.”
One of the most critical factors for anyone hoping to avoid seeing a financial advisor is a steady, consistent history of disciplined savings.
“Disciplined and consistent saving or investing patterns point towards a strong self-management of finances,” Odom noted.
Have you been putting money into your emergency fund every month or every paycheck for years? Do you have a clear investment contribution every month, like a 401(k) or IRA?
If you’re not consistently saving and investing, you may need someone to help keep you on track and in line.
Far too many people pay way more than their share of taxes because they don’t understand write-offs, credits and other tax codes that can save you hundreds, if not thousands, of dollars each year.
If you don’t have this level of understanding, you’ll want to pay someone for theirs until you do.
“Individuals who are knowledgeable about diverse tax benefits can often navigate financial waters without outside aid,” Odom added.
Odom also added “well-debt-managed individuals generally have a sound understanding of financial health.”
Debt is not always a bad thing. A mortgage can be an incredible investment that also happens to be a debt. We just want to make sure your debt is manageable and being responsibly managed.
Are you paying off your debt early to save on interest? Are you taking out too many credit cards for things you “want” as opposed to things you need?
On the road to financial literacy and freedom, you should be minimizing debt and maximizing income. If you’re doing that, you’re in a solid position to run your own finances.
Everyone should have a minimum of six months’ worth of expenses saved in an emergency fund before they do any other saving or investing.
“The presence of a solid emergency fund indicating foresight and preparedness can suggest that an individual is capable of managing their finances without an advisor,” Odom said.
Finally, and perhaps most importantly, you want to be sure you have an in-depth understanding of money. Obviously, you don’t want to try to run your own finances if you don’t feel equipped to do it.
“Spending time watching videos, reading financial books and articles from reputable and educated professionals is more than enough to create as good of a plan that an advisor can create,” LaPointe pointed out.
So, even if you’re not ready to manage your money without a financial planner now, you know what to do to get there. Take the time to educate yourself, talk to a planner if you have one now, and get yourself to a place where you can manage your money yourself.
It just takes time, patience, and dedication.
You’ve got this!
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: You Don’t Need Me If You Check Off These 7 Things
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