Are your finances complex enough to seek help? Find out when your financial situation calls for a financial advisor.
Stuck on the fence about whether to hire a financial advisor? Apparently, you’re not alone.
Why Don’t More People Use a Financial Advisor?
There are a few possible reasons people are hesitant to connect with a financial advisor:
(1) Many people have the perception that financial advisors are only for the wealthy.
(2) The perception that investing is too risky, and people are better off saving their money in traditional savings accounts.
(3) With so much financial information at our fingertips, many believe they know enough to manage their own finances well.
And yet, according to a different survey by cloud-based technology platform Intelliflo, “59% of Americans [say they] want financial advice, but do not know how to get it.”
Could financial advisors be underrated and underutilized in the United States?
Here are some questions to consider as you determine whether or not you could benefit from the help of one of these professionals.
It’s Never a Bad Time to Invest in Financial Literacy
You’re probably familiar with the adage, “It’s not how much you make. It’s how you manage it.”
The idea is that even if you earn a high income, poor money management can lead to financial troubles. On the other hand, people with modest incomes can still achieve financial security through effective budgeting, saving, and investment strategies.
Even though we’re looking at some financial complexities that do warrant professional advice, a financial advisor can help just about anyone (even those without complex finances) improve their money management skills and plan for the future.
How to Assess Whether You Need a Financial Advisor
There are plenty of factors at play when it comes to seeking help with your money. The time you spend on money management, whether you feel confident or knowledgeable enough, and how stressed your money makes you all add to the decision.
But first, let’s just look at your finances.
1. Take Stock of Your Finances
Answering some simple money questions will help you get a bead on whether a financial advisor is a good idea for you.
How Many Income Streams Do You Have?
Having multiple income sources complicates your financial picture in a couple of ways:
For one thing, not all incomes are alike. Different income streams come with their own tax implications and reporting requirements.
Beyond your primary job or business, do you have money coming in from rental properties, investments, freelance work, side hustles, or other sources?
The more diversified your income, the more financial complexity you might encounter. If you’re juggling multiple income streams and feel lost about how to report come tax season, some professional guidance may be beneficial.
What’s Your Debt Load?
Debt isn’t anything to be ashamed of. However, it can make managing your finances more complicated.
The main reason is that different types of debt come with different terms, interest rates, and repayment schedules. Paying off one debt might take a completely different strategy from paying off another.
Mortgages, for instance, are often long-term commitments. Credit card debt, on the other hand, can carry high interest rates and require more immediate attention. Student loans may come with unique repayment options and potential forgiveness programs.
If your debt load is becoming a financial burden or if you’re struggling to make progress in reducing it, a financial advisor can help you craft a comprehensive debt repayment strategy and potentially save you money in the long run.
Is Your Tax Situation Becoming More Complex?
This is an area where even the most financially savvy individuals need a guide.
If you own a business, whether it’s a side venture or a full-scale company, you’ll likely encounter intricate tax implications, such as self-employment tax and deductions specific to your industry.
If you invest your money, various types of income—from capital gains to dividends—may introduce another layer of tax considerations. And, if it wasn’t complicated enough, changing tax laws can make it even worse. Tax codes can be absolutely byzantine in their complexity and are frequently subject to revision, making it hard to keep up on what you’ll owe the government.
If you own a business, have a diverse investment portfolio, or find it challenging to keep up with changing tax laws, it might be an ideal time to get some professional advice.
Do You Have a Diverse Investment Portfolio?
A diverse investment portfolio can be a powerful tool for wealth building, but it also introduces a new layer of financial complexity.
Diverse investments can include stocks, bonds, mutual funds, real estate, and other assets. Each of these comes with its own risk factors, market behaviors, and tax considerations. For instance, stocks can be volatile, bonds are influenced by interest rates, and real estate may require property management.
As you evaluate your investment mix, consider whether you are comfortable with the level of risk in your investments and if you have a strategy in place to achieve your financial goals.
If you find that your investment portfolio is starting to feel complicated or if you’re struggling to maintain a diversified, balanced, and tax-efficient approach, a financial advisor could be a wise call.
Are You Prepared for Retirement?
Do you have a clear retirement plan in place, with savings goals and strategies to meet them?
Are you well-versed in the various retirement account options, such as 401(k)s, IRAs, and pensions, and their associated tax benefits?
A financial advisor can help you define your retirement goals, determine how much you need to save, and develop a customized plan to reach those goals. They can also provide valuable insights into retirement account options and the best strategies for optimizing them.
Whether you’re just starting your retirement planning journey or reassessing an existing plan, a financial advisor can be a valuable resource to help you secure a comfortable retirement.
Estate Planning—Have You Thought About It?
Estate planning might not be on everyone’s radar, but for some individuals, it’s a critical consideration.
It involves crafting a plan for your assets, including wills, trusts, and inheritance strategies, to ensure they’re distributed according to your wishes when you’re no longer here. If you haven’t thought about these aspects, it’s a good time to reflect on your estate planning needs.
If you’re uncertain about where to begin, a financial advisor can help you create an estate plan that safeguards your assets and minimizes potential tax burdens for your beneficiaries.
2. Life Events and Financial Stress: Are They Taking a Toll?
After getting the lay of your finances, it’s time to look at your life and how money affects it. Does money cause you stress? Have you undergone a life event that will change how you manage money?
Here are some questions to consider, the answers to which might shed light on whether a financial advisor can help you.
Life Changes: Any Major Life Events Recently?
Major life events can quickly complicate your finances. Have you experienced any lately? Marriage, divorce, the birth of a child, buying a house, and starting a business are all significant life changes.
If you said yes, how has that change impacted your financial situation? Life changes can affect not only how much or how little money you have, they can also affect how you pay taxes.
A financial advisor can help you navigate these changes and make a plan to help you protect your livelihood.
Is Money Stress Keeping You Up at Night?
Is financial anxiety becoming a regular part of your life? Constant financial stress can be a red flag and a sign that some outside help is called for.
A financial advisor can help you see the whole picture as you seek peace of mind about your financial decisions.
3. Time, Expertise, and Goal-Setting
Time, know-how, and vision are three rare commodities, without which it can be very difficult to manage a complex financial situation.
Do You Have the Time and Expertise?
In the world of personal finance, time and expertise are invaluable commodities. Do you have the time and financial knowledge required to manage your affairs effectively?
Can you confidently navigate the complex landscape of investments, taxes, debt management, and retirement planning on your own?
Have You Set Financial Goals?
Setting and achieving financial goals is another aspect of your financial life to ponder. Are you actively defining and working toward your financial objectives, or does it feel like you’re wandering aimlessly, without a clear path to your desired financial destination? Your financial goals should be more than just wishes; they should be well-defined and attainable.
If you find that time constraints, lack of expertise, or unclear financial goals are hindering your financial progress, this might be the moment to consider engaging a financial advisor.
As you’ve explored the complexities of your financial situation, you might have realized that managing multiple income streams, debt, taxes, investments, retirement planning, and estate matters can be overwhelming.
But remember, seeking help from a financial advisor isn’t a sign of weakness; it’s a resource for those who value expert insights and customized strategies. Whether you’re a Millennial, a Gen Xer, or a Baby Boomer, the path to financial well-being will be as unique as you are.
By enlisting the support of a financial advisor, you can simplify, set goals, and secure a more stable and prosperous future.
Don’t hesitate to reach out for professional assistance when you need it.
Find a Financial Advisor
American Wealth Management is a financial management company based in Reno, Nevada, that caters to both local residents and individuals nationwide.
Feel free to get in touch with our team for tailored assistance in handling your finances and strategizing for your retirement.
Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.