How often do you see a doctor? Once a year unless you’re sick, right? How about a dentist? Probably twice a year, unless you’re afraid of the dental chair. But you know you shouldn’t wait until your teeth hurt to make that appointment.
Financial advice is similar. When things are going well, we don’t feel we need it. Who wants to hear they should save more, or have cash in a rainy day fund, or pay off credit card debts? A bummer, even if it’s good advice.
Yet, like with the doctor and the dentist, you’re better off meeting more regularly with your financial advisor. It need not be annually (although that would be great) but every three to five years it pays to sit down and have a real discussion about your progress.
Why? Because things change. Sometimes they change a lot. I’m not talking about the stock market but your own life. Getting married, for instance. Having a child. Losing a parent.
All of these things can have a material impact on not just your personal and emotional well-being but on your financial trajectory as well. Do you need to buy life insurance? Are you saving enough into college and retirement plans? What tax implications are ahead?
It’s always better to hire an advisor before you need one. That way you can begin the relationship without having it tested by circumstances beyond your control. Volatile markets can upset even the most unflappable of investors, adding to the stress of life events.
When do you need to hire a financial advisor and why? Here are some likely touchpoints:
1. You’ve got a new job
If you are at a job that offers a 401(k) plan a lot of the investment issues are likely settled in advance. You’ll be presented with a list of mutual funds and, with any luck, a basic suggested portfolio using those.
What you won’t get is personalized advice on taxes and proper investments for your goals. An advisor who charges an hourly fee can help set up a basic plan that will get you on the right path early, when it matters.
2. You’re combing assets with another
Getting married or otherwise cohabiting for the long term means having to sort out a fair and honest way to share income and share investment goals with your new life partner. Fresh air is the best disinfectant, as they say, so be prepared to be brutally honest about the good, the bad and ugly, such as past and current debts.
An advisor can be a good third-party voice, an impartial coach who can help you settle into a lifelong partnership that serves you both while keeping the lines of communication clear and open in regard to finances.
3. You aren’t sure you can retire
Being ready to quit work is a big deal. Never mind the emotional issues of a change of life. You need to be sure you can handle it financially, too. Obviously, an advisor makes sense as your planned retirement date nears.
Money matters can be distracting and test of one’s patience. A good advisor in your corner can reduce that stress and help you keep on track toward your long-term financial goals.