Many people are intimidated by the prospect of taking control of their own financial destiny. Yet despite that fact only half of us are seeking out financial advice. Whether intentional or not most of us are choosing to go it alone. We would suspect this isn’t entirely by choice but more by default. Even though there are ample tools and advice that can equip you to manage your own money. Online brokerage’s like Scottrade and E-Trade come with incredible research tools and there are of course hundreds of personal finance blogs loaded with more advice that you could ever read. So before you go out and hire a financial planner there are several questions you should answer.
If you wish you could also take this personal finance quiz “Can I Manage My Own Money?” and see how you stack up.
How Much Do You Have Invested? How Much Do You Need For Retirement? Do I Know Where to Invest It?
One of the most important factors you should consider when you venture out to manage your own money is how much money do you currently have invested, how much will you need when you retire, and do you know what to do with it? You need to have a target amount in place if you hope to manage your own money. This is the first hurdle if you are going to answer this question with a resounding yes.
You may also want to set a limit after which you will consult a professional. For example once you have $150,000 saved you could choose to consult with a financial planner. Set the bar at which you want to call in back up. The higher amount you have to work with the better financial planner you’ll be able to hire. If you plan on taking your financial destiny into your own hands have a good plan, Your first meeting with a financial planner will set the tone for your relationship. Make sure they know that you mean business. Having a well thought out plan can also help you keep from being taken advantage of, which unfortunately happens.
Do You Understand Your Tax Liability?
If you choose to manage your own money, you need to have a firm grasp on what your tax liability will be during retirement. If you spend a lifetime of investing without knowledge of your retirement taxes you could end up losing big money in this most critical season of life. Do you know how to handle your pension in retirement? Should you put your money into a tax sheltered annuity? These are critical questions that you need to be able to answer. If you don’t fully understand your potential tax liability in retirement, you need to consult with a financial professional as soon as possible. Nothing is certain in life but death and taxes, and knowing how to handle the latter is very important.
Do You Have the Time/Energy/Interest In Managing Your Own Money?
If you have the time and desire to track your own finances, know what you need to have saved for retirement, and have a well balanced diversified portfolio you probably can manage your own money; utilizing the help of a financial planner on an as needed basis. If you don’t know where your money gets spent each month, get stressed out thinking about retirement, and don’t have time to research investment options you should consider hiring a financial planner. There’s nothing wrong with admitting you need some help, it’s far more damaging to be too prideful to admit you need it.
Do you feel confident in your ability to manage your own money? Are you more comfortable with putting your money into the hands of a financial professional?