Paying for financial advice.

ea1776 · #1 (**permalink**) 03-26-2008, 03:45 PM

I consider myself a very intelligent human being, capable of self-learning almost anything (including finance).

However, I am not the most knowledgeable financial human being at the moment, and that eats away at my financial plan confidence. So naturally, I'm looking at raising that confidence (and hopefully improving my financial plan along the way).

I am capable of figuring out financial plans on my own (at least I think I am), through forums like this, advice from people at the water cooler, and reading through IRS publications... to name a few.

Having said all that, my questions are the following:

1. Does it make sense to *pay* for financial advice if I am a single, 25-year old, with a salary of ~73k, total debt at ~50k averaged at ~6%, 401K savings at around 15k, Roth IRA savings just beginning, and a pretty good general understanding of how to plan financially?

2. If the answer to #1 is "yes", then what should be a maximum amount to pay such a person for financial advice? Is there a general rule (like %salary) of how much to pay someone for financial advice? (i.e. Should I just research stuff myself, and get over the fact that I'm not super-confident?)

Thanks for your input,
ea1776

maat55 · #2 (**permalink**) 03-26-2008, 04:00 PM

I reccomend you read Dave Ramsey's book The Total Money Makeover. Also, Suzis Ormans book The Young Fabulous and Broke is a good read.

These books will give you all you need to know about finances.

jIM_Ohio · #3 (**permalink**) 03-26-2008, 04:05 PM

NO- you don't need to pay for advice. If you have the time to post here and at similar forums, you can learn enough to get started.

I think the withdraw startegies and taxes year to year are more important places to get advice with finances.

ea1776 · #4 (**permalink**) 03-26-2008, 04:13 PM

Quote:

Originally Posted by jIM_Ohio

withdraw startegies and taxes year to year are more important places to get advice with finances.

Thanks for posting. What is meant by withdraw strategies?

Yes, tax advice is definitely one of the things I need. I know simple stuff, like contribute as much as possible to Roth IRA, get tax deductions on as much as you can, and contribute to my 401k as much as I can. But maybe the financial adviser knows more...?

kork13 · #5 (**permalink**) 03-26-2008, 04:48 PM

I believe withdraw strategies are for well down the road, when you're trying to figure out how to withdraw all of your retirement savings to live off of.

I mentioned this elsewhere, but many banks and investment firms are starting to hire financial advisers to offer services to their customers either for free or at a low cost. You might see if your bank offers that. My bank offers it for free, and I've used their services many times. Not that their advice is always perfect, but I'll admit that they've told me some stuff that I'm glad I listened to, and if nothing else, it's always good to get opinions from many sources.

In any case, if you choose to talk with a financial adviser, avoid ones who are paid by commission--while there are many like this who legitimately want to help you out, the risk is high that they may just lead you toward strategies which will yield higher commissions for themselves. Rather, look for one who is salaried by an advisory company to which you pay a flat fee, or someone who you pay by the hour.

Otherwise, I'll echo Jim by saying that forums like this are collectively very knowledgeable on alot of things you might have questions about. From what I've read/picked up on, many people here actually are in the financial business anyway, so you can get alot of good ideas from the people here--for free. Just ask, everyone is happy to help.

disneysteve · #6 (**permalink**) 03-26-2008, 06:25 PM

Quote:

Originally Posted by maat55

I reccomend you read Dave Ramsey's book The Total Money Makeover. Also, Suzis Ormans book The Young Fabulous and Broke is a good read.

These books will give you all you need to know about finances.

While I won't argue that those are both good books, I'd have to disagree that those two books alone would teach you everything you need to know. I don't think there is any one book (or any two) that cover everything. Plus, I have yet to read a personal finance book that I agree with 100%.

Scanner · #7 (**permalink**) 03-26-2008, 07:15 PM

I think there's a time to pay for advice and a time not to.

Long range investment plans can generally be hashed out for the average investor by themselves.

A time you may need professional advice is when you fall into a big windfall, like you have 30K sitting around at the end of the year. At that juncture, it can be money wellspent to have an accountant advise you. A CPA with the extra CFP designation can be the best IMO.

maat55 · #8 (**permalink**) 03-26-2008, 07:16 PM

Quote:

Originally Posted by disneysteve

While I won't argue that those are both good books, I'd have to disagree that those two books alone would teach you everything you need to know. I don't think there is any one book (or any two) that cover everything. Plus, I have yet to read a personal finance book that I agree with 100%.

Though they may not get into the rocket science of finance, they do give a broad understanding of day to day finances and investing. I don't think that many people will be looking for advisers after reading these books.

I noticed you didn't offer any advice, hum.

yellow heel · #9 (**permalink**) 03-26-2008, 11:19 PM

Go to your local library. Read some books in the finance section (just pick a title that interests you and read a couple books. After a couple books you will learn to form your own opinion.

this is what i did. All those books general have the same idea. You'll get the hang of it with the help of books and these kind of forums.

maat55 · #10 (**permalink**) 03-27-2008, 04:42 AM

Another great book is Personal Finance (Desk Reference). This book gives you the meat and potatoes of just about everything. Planning, budgeting, EF's, financial software, interest rates, inflation, banking, insurance, debt management, credit ratings, investing, realestate, taxes, retirement, estate planning and life changes.

I would read Dave's book for advice on how to get out of debt and for his debt free philosophy. The other is good for understanding all the aspects listed.

disneysteve · #11 (**permalink**) 03-27-2008, 05:41 AM

Quote:

Originally Posted by maat55

I don't think that many people will be looking for advisers after reading these books.

I noticed you didn't offer any advice, hum.

I agree. As I said, they are both good books. I also think The Wealthy Barber and The Millionaire Next Door are good in getting folks in the right mindset about dealing with money.

My advice? Well, other than my accountant who does our taxes, I don't pay for any financial advice (unless you count my internet costs for hanging out here

). I've also had a financial plan run a few times over the years by our insurance agent, though I didn't pay anything for that service beyond whatever the agent already earns from our policies. So I haven't seen the need to pay for financial advice so far. And I certainly wouldn't have considered it when I was in my 20's. I could see seeking some professional guidance when I'm closer to retirement age, but I've got quite a while to go before then.

M-squared · #12 (**permalink**) 03-27-2008, 06:03 AM

Does your place of employment offer any seminars? We have periodic seminars once or twice a year on various topics that are generally helpful. Additionally, a couple of times a year HR has financial advisers from TIAA-Cref (I work for a college, so that is our plan) come out for individual appointments.

disneysteve · #13 (**permalink**) 03-27-2008, 06:09 AM

In addition to the Suze Orman book maat55 mentioned, don't forget that she also has a weekly TV show on MSNBC. I think it is Saturday at 9pm.

Slug · #14 (**permalink**) 03-27-2008, 01:09 PM

I'm with the crowd on this one. If you're here and you're reading, you're probably fine. If you come into a large sum of money, maybe you'd need some help. I know I would. For me, I've been in your situation wondering if I need the help and considered paying for it. I looked into it and never really found anyone that I though new a WHOLE lot more than I did that would justify the expense. Maybe I'm just egotistical and cheap :-)

disneysteve · #15 (**permalink**) 03-27-2008, 02:41 PM

Quote:

Originally Posted by Slug

I looked into it and never really found anyone that I though new a WHOLE lot more than I did

That's a great point. My feelings exactly. I read Money, Kiplinger's and Smart Money every month. I read the business section of the paper. I read a few online financial sites. I've read numerous personal finance books by a variety of authors. I watch some financial shows on TV. What exactly is a planner going to tell me that I don't already know?

If you feel you don't know all you should, it is not tough to find places to educate yourself, like all the things I just listed.

maat55 · #16 (**permalink**) 03-27-2008, 06:40 PM

Quote:

Originally Posted by disneysteve

I agree. As I said, they are both good books. I also think The Wealthy Barber and The Millionaire Next Door are good in getting folks in the right mindset about dealing with money.

My advice? Well, other than my accountant who does our taxes, I don't pay for any financial advice (unless you count my internet costs for hanging out here

). I've also had a financial plan run a few times over the years by our insurance agent, though I didn't pay anything for that service beyond whatever the agent already earns from our policies. So I haven't seen the need to pay for financial advice so far. And I certainly wouldn't have considered it when I was in my 20's. I could see seeking some professional guidance when I'm closer to retirement age, but I've got quite a while to go before then.

Like you, reading books and hanging out here gives me plenty of knowledge. I've heard alot about that book the Millionaire Next Door on DR's show, it's next on my list to read.

kork13 · #17 (**permalink**) 03-27-2008, 06:53 PM

I've got Millionaire Next Door, it was a great read, and very useful thoughts and perspective. One of a few that I recommend to people if they're interested in finances...

jIM_Ohio · #18 (**permalink**) 03-30-2008, 05:56 PM

Quote:

Originally Posted by ea1776

Thanks for posting. What is meant by withdraw strategies?

Yes, tax advice is definitely one of the things I need. I know simple stuff, like contribute as much as possible to Roth IRA, get tax deductions on as much as you can, and contribute to my 401k as much as I can. But maybe the financial adviser knows more...?

Withdrawing money from accounts can lead you down many paths. If you touch one account or another too soon and draw down principle, it could cost you hundreds of thousands of dollars in future returns- based on taxes paid or lost returns in account.

My advice to anyone accumulating is to learn more about taxes- just how a tax return is filed, what percentages of taxes you are paying, and what tax bracket you are in, Knowing about deductions, phase outs and capital gains taxes will also help.

You don't need to learn "everything" about taxes- it's one of my weaker areas of knowledge. But learning a little every year from age 25-55 is better than trying to learn enough to make sense when I retire at age 56.

MaksimFA · #19 (**permalink**) 03-30-2008, 09:23 PM

Here is what it boils down to... if you can answer these questions honestly then by all means do it yourself, otherwise if you can afford to pay for advice do it.

1. Do you have the self disiciple to run and plan your finances like your job?
2. Do you have the time to keep up to date with all the changes in the economy and tax law changes? And NO, financial pornography like CNBC and Bloomberg doesnt count.
3. Do you have the disiciple to give yourself OBJECTIVE advice regarding your financial habits and investments?

That is the beginning point. Aside the fact that if you can do it, and learn about it, is your time worth it?

I am a financial planner and I still have one of my coworkers handle my finances as I know for a fact, I do not give myself objective advice... I still sometimes want to think there is easy money.

Am I saying you cant do it yourself? Absolutely not, but it wouldnt hurt to have another professional opinion.

And btw... those books are good... but i wouldnt touch Suze Orman with a ten foot pole.... once a failed planner with ML, now pushing her fico kit. Dave Ramsey does have a good understanding of things, and I incorporate this principles into my meetings with clients.

QueenOphelia · #20 (**permalink**) 04-01-2008, 11:08 AM

If you want face-time without paying for it, I sugggest opening a brokerage/retirement account with someone like Fidelity that has walk-in centers.

Additionally, if you bank with a large bank ( I use Citibank) they have investment advisers as well (at no cost).

I don't know if I don't get charged because of my balances but it's worth a shot.