Ever thought about financial planning? Didn’t think so. Financial planning sounds like a pre-retirement move for people who have amassed a fat salary and a lot of spare cash. You’re at the beginning of your career, you have no savings and you’re too busy worrying about the here and now to think much about the future. Getting a financial adviser just isn’t on your radar yet. But should it be?

According to Nga Vu, a Senior Financial Adviser with the Kearney Group, financial planning may be even more valuable at 25 than it is at 50. “Financial planning is actually all about lifestyle,” she explains. “You get to set how you want to live now and into the future, and we’ll help guide you. We also firmly believe in our role as educators – good advisers will teach, as well as advise you. Our job is to empower people to make a lifetime of great financial decisions.”

Financial planning can take you from very small steps (like getting out of debt and learning to balance your budget); to big wealth-building strategies, which is why you should consider it sooner rather than later.

Financial planning is about being smart with money – the earlier you get started, the further you’re likely to go.

It’s not just about stocks and investments

The most common misconception about financial planning is that it’s all about investment management; that financial advisers exist to tell you how to invest your savings. That is part of what they do, but not the whole picture.

Basic budget and cash flow management

Financial planning begins with basic budget and cash flow management. Your financial adviser will take a look at your income and talk to you about what you want to achieve – whether that’s saving towards a house deposit or spending $100 a week on beer. Your adviser will then make a realistic plan with you that takes into account all of your regular expenses, showing you how you can better manage your money to achieve your goals.

“UNDERSTANDING HOW MONEY MOVES THROUGH YOUR HOUSEHOLD AND TRULY KNOWING WHAT YOU CAN AND CAN’T AFFORD PROVIDES THE FOUNDATION FOR EVERY OTHER FINANCIAL PLANNING STRATEGY.”

Like many financial planning companies, the Kearney Group offers its clients tools to help you basic budget and cash flow management. “The cash flow and budgeting piece of our work is crucial for everyone, but particularly for younger people and those on low incomes. Understanding how money moves through your household and truly knowing what you can and can’t afford provides the foundation for every other financial planning strategy,” Nga explains.

And learning to budget better will help you to save for the things you really want. If you’ve got your heart set on a major overseas holiday but you don’t know how to get there, a financial adviser can guide you. Advisers will work with you to plan for major purchases or life expenses – housing, education, holidays, family – helping you to understand how much you’ll need and how you can realistically get there.

Mortgages, loans and insurance (for when it hits the fan)

Financial advisers can act as brokers (a person who helps arrange or organise goods and services), helping you get a mortgage or a loan. They will shop the market to ensure you get the best deal and manage all the paperwork on your behalf.

Organising loans and reviewing debt

“Basically our job is to take all the pain and stress out of organising loans, and to ensure that when your facilities are set up, they’re established correctly and in a way that they won’t put strain on your household’s cash flow,” Nga says. “A good broking service will also include a Debt Review Service.”

In addition to organising new loans, your adviser can review the debts you already have and make sure they’re as lean as they can be. “By getting a bit of debt advice, you can save thousands (sometimes tens of thousands) in unnecessary repayments or tax,” Nga says. “Getting on top of a first mortgage or HECS-HELP debt is one of the most liberating things. It provides the much-needed oxygen to start saving and planning for the future.”

Insurance broking

Financial advisers can also act as insurance brokers. When you’re young, it’s hard to imagine that you’ll ever run into serious bad luck, but bad luck has a habit of dropping in unexpectedly – insurance is designed to build up your defences against a terrible twist of fate.

A financial adviser can walk you through all the possible risks to your income and financial security and explain the insurance options, including life insurance, total permanent disability insurance, trauma insurance and income protection. “As young people, if you insure nothing else, make sure you insure your income,” Nga suggests. “It’s your greatest asset.”

And then yes, there are stocks and investments

It doesn’t take much to start an investment portfolio. You can kick off with just a couple of thousand dollars and see a decent return, so long as you’re happy to leave those funds invested for a very long time.

Setting up an investment portfolio

A financial adviser can establish and manage an investment portfolio on your behalf, usually for a small percentage fee (but always ask to know what the fee is in dollars to avoid any confusion). When you’re starting out, your adviser will explain how investing actually works, and give you some guidance around what investment might suit your budget, your personal appetite for risk and the current economic climate.

Superannuation

A financial planner can also look at your superannuation (which is invested on your behalf by your super fund) and give you tips on how to get the most out of it when you retire. “Taking control of your super is also really important. In what other area of our lives would we allow someone to take 9.5% of our income and stuff it away in a black box?” Nga says. “Our job as advisers is to help you understand where this money is going and help you make the most of it.” The younger you are when you start thinking about this stuff, the more you can do to affect it and the better off you’ll be in the long term.

So how much does financial planning cost?

Your first meeting with a financial adviser should be a free, no obligation introduction to their services. You can explain your current financial situation and the adviser can give you a sense of how they can help you, and what the associated fees are going to be.

You can usually access financial planning services for free through your bank, and you’ll be using the financial products (insurance, mortgages, etc) that your bank offers. Generally speaking, independent financial advisers will arrange mortgages, insurance and loans for free also, because they’ll collect a fee from the loan/insurance institution after you sign up.

THE GOOD NEWS IS YOU CAN PAY FOR FINANCIAL ADVICE OUT OF YOUR SUPER.

Whether you’re dealing with your bank or an independent adviser, they’re required to tell you if they get any commissions or incentives for offering you certain products. The information should also be included in your adviser’s Financial Services Guide (FSG) or Credit Guide, which they are required to hand over before giving you financial advice.

If you decide to go ahead and get some advice or make a formal financial plan, your financial adviser will prepare a Statement of Advice, which outlines the exact strategy and the associated fees. Basic advice like budget and cash flow management should cost between $200-$700. More complex financial plans, taking into account businesses, investments, family tax issues, range from $2000-$8000 to establish, and then there are ongoing fees for the ongoing management of your finances.

Costs for financial planning services vary hugely depending on where you go for advice, so make sure you shop around. The good news is you can pay for financial advice out of your super – ask your adviser how.

How do I know if my financial adviser is worth it?

Check for qualifications first, Nga advises. You want to make sure your adviser has a degree in business or commerce and is a Certified Financial Planner.

“The other major thing is much more personal – you need to feel comfortable with the adviser you choose,” says Nga. “You’ll have lots of intimate conversations with them, things you may not discuss with your closest family or friends – so, ultimately, you just need to click. Don’t hesitate to ask around for a referral from people you trust. Word of mouth is a great way to find a likeminded adviser who’ll work well with you for years to come.”

http://thecusp.com.au/financial-planner-actually-need-one/4069

In this do-it-yourself (DIY) world, many people choose to manage their investments on their own. After all, the Internet is a treasure trove of information, and online trading forums make it easy for regular investors to trade like the pros. Nevertheless, even if you are investment savvy, sometimes a little help can go a long way. Whether you are having trouble planning for your retirement, or you have an estate you want to leave to your heirs, here’s a look at five reasons getting the help of a financial planner can pay you back in dividends.

You Don’t Know How To Save For Retirement

Retirement planning and saving usually goes beyond just putting money away in a company-sponsored retirement plan. While these saving plans help, often people have to supplement a 401(K) with additional savings and investments. It’s possible you will live more than twenty years in retirement, and if you want to keep the same lifestyle you had when you worked, you will need the help of a financial advisor. Financial planners will go over your current financial situation. Additionally, they will help you figure out how much you realistically need in retirement and structure a plan that meets your goals and needs.

A Marriage Or A Divorce Is In The Cards

Getting hitched means more than two people are coming together. It also means a commingling of income, assets, and debts. With financial woes being one of the main reasons people getting divorced, getting the help of a financial planner before you walk down the aisle or just right after you get married can go a long way in avoiding marital strife. A financial planner can help both husband and wife budget their money, save for common goals and make the right investment choices. If the newlyweds have different ideas about their financial objectives, a financial planner can bridge the gap.

The same can be said for a divorce. If this is the first time you will be managing money on your own, or you came into a sudden windfall because of an impending divorce, a financial planner can help you along the way.

You're Caring For An Aging Or Sick Parent

Nobody wants to see their mom or dad become ill as they age, but unfortunately, that is a reality for millions of people. Caring for an aging or sick parent is going to require more than being a caregiver, it’s going to cost money and lots of it. If you don’t know where to start in terms of paying for care or you’re squabbling with siblings on the best way to do it, a financial planner could be in order. After all financial planners are neutral parties and aren’t going to take sides in a family fight. Experts in elder care are going to know the ins and outs in terms of covering the bills, getting the best care, and whether or not the person is eligible for aid and government benefits.

You Receive a Sudden Windfall

There’s a reason many lottery winners end up bankrupt a few years later: they don’t know how to handle a sudden windfall. Whether you just got a sizeable sum of money from an inheritance, you won the lottery or landed a lucrative job, managing large amounts of money can be complicated. If you make a few bad mistakes, that money can be gone in no time, which is why the help of a financial planner may be necessary. When people come into money, lots of hands are usually extended looking for a way to cash in. A financial planner is going to give you sound advice and prevent you from blowing the money on gifts for families and friends. The financial planner will also help you figure out ways to grow your sudden windfall to meet your long time goals.

You Have An Estate You Want To Leave To Heirs

The intention of leaving an estate to heirs is to ensure they can live comfortable once you are gone, but devising an estate plan has become increasingly complex, and may require the help of a professional. While an estate plan has to consider federal tax laws, now state governments have gotten into the mix with at least nineteen of them having an estate tax or inheritance tax. New Jersey and Maryland have both. In addition to the tax repercussions of an estate plan, parents have to consider who to leave the money to and who will be in charge of the estate. A good financial planner will work with you to create an estate plan that addresses the needs and goals of multiple heirs.

The Bottom Line

Going it alone may seem like the cheapest way to manage your money and investments, but it can end up costing you a lot in the long-run. Whether you are struggling to plan for retirement, or you came into a sudden windfall, the help of a knowledgeable and reputable financial planner can go a long way in making sure you stay on course to meet your unique financial needs and goals.