How To Be A DIY-er In Your Finances
Are you a Do-It-Yourself (DIY)-er type of person? Maybe you are the one who sees something that needs to get done or fixed around your home or office and takes it on, or perhaps you like doing things on your own in general. It could be a much-needed bookshelf. A computer program that needs tweaking. Maybe a car part needs to be put in. Your neighbor might like going to the gym, but you prefer working out independently and trying different things.
And so you make a plan. You get the necessary materials and resources. You watch tutorials and videos online. You get to work. You finish the project, take a selfie, post it on social media, or call your best friend and celebrate!
Or -- not. Maybe you run into a snag. Perhaps something else came up that needed your attention. Maybe you got confused with the instructions and decided to work on it later. Perhaps you needed a guide or accountability partner to help you complete your DIY project.
So how does being DIY-er and the idea of an "accountability partner" relate to financial planning anyway?
As you may know, much of the financial services industry is built on complexity and lack of transparency. We see this continually, and more recently, with the 2008-09 financial services meltdown and the legislation that followed. As a result, the public generally does not trust the financial services industry. However, if there was transparency, and you are the DIY type of person, you would do these things independently. Wouldn't you?
This reason is why I say you should not hire a financial advisor to "manage" your money. Having someone manage your money often implies or requires a minimum of assets to manage. Instead, you can educate yourself and do this on your own. You can see the appetite for financial education with the abundance of books, podcasts, and Facebook groups on managing money.
Many of you know that getting financial advice doesn't come cheap. The typical model is to pay a financial advisor a 1% fee to manage your assets or Assets Under Management (AUM).
This could translate into paying a financial advisor $5,000 to manage $500,000 of AUM or more than $10,000 for over $1 million. Typically, these investment advisors will pick several mutual funds (which also have fees) and occasionally rebalance your portfolio. This does not seem like much work for what you are paying them for. There must be a better way!
You are ultimately responsible for managing your own money, but your financial advisor will provide solid guidance on a portfolio that is right for you. This changes the traditional top-down relationship and empowers you to learn more about investing and money management. In the long run, this is a better option.
In the past, it was not easy to manage your money with all of the different options and not good research readily available to back up your assumptions. But with the Internet and zero-commission trading, there is no excuse not to do it alone. All you need is some guidance and an Internet connection!
For instance, you can get a low-cost target-based retirement fund that automatically adjusts for your retirement age. And most employers have realized this and provided employees access to these funds for their 401(k) plans. There are also many options for an all-in-one portfolio, making investing easy for any goal. These funds are diversified, automatically rebalance, and can be chosen by you by your projected retirement date or other purposes. Not too hard, right??
You should know more about other more critical issues such as financial planning. Financial planning is working with you to achieve short- and long-term personal financial goals. Essentially, helping you through life's ups and downs. Questions financial planner can help with:
Will you have enough saved for retirement?
Are you doing tax planning to reduce your tax liability?
Do you have adequate insurance coverage to protect you against risks?
Can you save enough money for a goal such as your child's college?
How do I pay down my credit card or student loan debt?
A financial planner is your accountability partner that works to help you achieve your personal financial goals. It would help if you had an accountability partner that would be by your side through the ups and downs of life. In the spirit of DIY and independence to figure things out, you can educate and thereby empower yourself to make the best financial decisions as you see fit. Reach out to me on the "contact us" below, and I would be glad to help. You got this!
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on to avoid federal tax penalties. Individuals are encouraged to seek advice from their tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.