Let’s say you’re a first year school teacher, with a Masters degree, and you’re making about $45,000 a year. Yes, you need financial planning—and in all likelihood, a professional financial planner to help.
How about the second-year city bus driver with no degree? Does he need help too? What about the union machinist? I’ve offered professional advice to these types of average, middle-class clients for 24 years. Yes, everyone should do financial planning, and probably hire a financial planner. Taking a zero or two off of an income does not change the children’s college cost, but it does take a zero or two off of the retirement savings. Everyone should plan for retirement at the very least, and not just wait and see how those golden years will look.
Often times, the reason people don’t plan—or hire help—is because they’re confused about what to do, who to do it with, and how much it will cost. First, any professional help should not cost more than one percent of your household income. If your goals are simple and straightforward (for example, you want to save money for college and retirement), then a planner should charge you no more than half a percent of your household income. So, in general, if you have a household with an income of $75,000, you should not expect to pay more than $750 per year. If your goals are simple, you might pay around $400 per year. If the cost does not fit into your budget, most financial websites provide many tools that allow you to do the calculations yourself. You just have to make sure that you implement whatever plan you come up with and follow through.
Having a professionally drafted financial plan is money well-spent. In its simplest terms, an adviser can assist you in the act of taking a good look at where you are financially, help you decide where you would like to be, and then lay a road map to lead you there. A robust, comprehensive plan should always begin with a conversation about your budget and conclude with a discussion of what happens to your wealth when you are gone. The budgeting is something most dread. Many people do it only when confronted with hard times, out of necessity to cut expenses. A good plan also directs some effort toward improving your income. Your planner can help you quantify all of your personal and professional goals. He or she can also assess risks that could potentially derail your plan. One of the bigger risks these days, for those in the between ages 25 and 45, is unexpectedly facing the care of an elderly parent. In other words, if Mama gets sick, what will we do with her?
Finally, the most important part of financial planning is implementation and follow-up. Once there is a plan, it is useless without taking action, and review at least once per year.
Whatever you do, don’t let the notion that financial planning is for the rich persist. Financial planning is for everyone.
Eric D. Grant is a financial advisor with Polaris Wealth Management, a financial planning, wealth advisory, and financial services firm in Chicago. Eric is also an Investment Adviser Representative with ING Financial Partners, member SIPC. Polaris Wealth Management is not a subsidiary of nor controlled by ING Financial Partners.