First Milestones Mark Need for Financial Advice
If you're just starting out, you might not give much thought to working with a financial professional. You may associate the process with retirement--a retirement that seems so far off that more immediate concerns take precedence. The fact is, though, a financial professional can prove to be a valuable resource to those just starting out. And, while there's never a bad time to seek professional advice, early life-changing events make it especially important to take stock of your financial situation.
Starting a career
It may seem counterintuitive--when you're starting out, it's often more about future potential and possibilities than focusing on the present. But this is actually the perfect time to begin building a relationship with a financial professional. It's also the perfect time to establish good financial habits, like building an adequate cash reserve, starting to save on a consistent basis, and establishing a good credit history. You may need help implementing a spending plan (aka "budget") that will help you to meet current financial needs and still enable you to make progress toward your future goals.
It's not all about the future, though. A financial professional can help you get the most out of your paycheck by working with you to maximize the value of tax-advantaged benefits offered by your employer, including employer-provided health coverage or a qualified retirement plan. In addition, you may need help with issues as common as paying back student loans, or as complicated as understanding employer stock options.
You know you need financial help when key words used to solemnize the occasion include "…for richer or poorer…" There's the immediate financial aspects of a wedding (paying for everything), but--more importantly--there's the long-term financial challenges that come when two individuals combine their finances. Like the ghosts of boyfriends and girlfriends past, you each bring your own financial history, attitudes, and habits (both good and bad) to the union.
A financial professional can help you define your goals as a couple. You'll want to come up with a joint spending plan to help you achieve these goals, and decide on the mechanics of day-to-day money management. For example, will you combine your bank accounts or keep them separate? In cases where you and your spouse aren't on the same page, a third party can listen to all concerns, identify underlying issues, and help you find common ground. A professional can also work with you to make sure that you're making the most efficient use of employer benefits, including health insurance and qualified retirement plans, that you have adequate life insurance coverage, and that the investments you choose are appropriate for your goals, time frames, and risk tolerance.
Beginning a family
The period of time following the birth of a child is both exciting and stressful. It's time to completely reevaluate your financial situation, starting with your goals. For example, in addition to saving for your own retirement, it's time to start thinking about saving for your child's college education. Your existing spending plan is likely to be the victim of suddenly decreased income (if there's to be a stay-at-home spouse) or a significant new expenditure (child care). If nothing else, you need to account for the additional ongoing expenses that come with parenthood (e.g., baby formula, food, diapers, clothing).
With children in the equation, having adequate health insurance, life insurance, and disability income insurance takes on new significance, and you may want to work with someone to evaluate your needs, obtain appropriate coverage, and make sure your beneficiary designations reflect your wishes. It's also time to establish an appropriate estate plan--including a will, health-care proxy, and durable power of attorney--or to update an existing estate plan. A financial professional can help walk you through some of the issues involved, and can help you find an attorney if you don't have one already.
Need for advice grows over time
If you're like most people, your financial needs will grow more complex over time. As that happens, your need for financial advice will increase as well. By starting early, you're able to build on a solid financial foundation. With each life milestone, a financial professional can help you develop a clear picture of your current financial situation, work with you to articulate and prioritize your financial goals and timelines, and recommend strategies and products that are appropriate for your objectives.