Finance your future
A volatile economy, the election of a successor to Bill Clinton, and a new decade with uncertain situations are reasons many people are re-evaluating their financial positions. Experts agree that every person should have a personal or family plan, which documents how much is earned, how it is spent, and how it is saved or invested for the future.
As more and more companies do away with guaranteed pensions and encourage employees to invest on their own through 401(k) plans, average citizens are facing often-confusing financial choices, usually linked to the stock market. Nearly 40 percent of households headed by someone under age 35 own stocks, and more than 25 percent of Americans own stocks today, compared with 1965 when only one in 10 did so.
Increasingly, therefore, investors are turning to financial professionals for help. But finding one that's right for you can require some effort.
Financial planning help
A financial planner assesses where you are financially, then helps you move toward a more secure future. A planner looks at the big picture and considers accounting, investing, tax, and insurance issues.
Asking the right questions will help you find a planner whose qualifications, experience, and expertise meet your specific situation. Questions should probe:
· The planner's background, including education, experience, and professional-group affiliations.
· References from three or more clients you may call.
· The planner's competence in all types of investments, insurance, and tax strategies. A financial planner need not be a specialist in all these areas, but should be sufficiently familiar with them to deliver a comprehensive plan.
· How is the planner compensated? The three basic methods are: fee only, generally on an hourly or per-plan basis; fee plus commissions the consultant receives on products sold; and commission only, based on the percentage of the amount spent on the financial products the client purchases through the consultant in the course of, or as a result of, counseling.
Not everyone needs a financial planner. You may be perfectly comfortable charting your own course. You may, however, want to consult a planner if you're having trouble realizing your goals. You may also call on one periodically to get expert advice and review your personal financial plan; a financial planner will help guide you through specific issues, such as making the transition from the work force to retirement.
Just who seeks advice? Most are two-income couples between the ages of 45 and 64 with an annual gross income of $80,000 and a net income of $50,000, according to the College for Financial Planning in Denver. If you are in your 20s, with a savings plan at work and a mutual fund or two, you can probably manage just fine on your own.
But if you've had a few jobs and accumulated a mortgage and a smattering of Individual Retirement Accounts (IRAs) and retirement plans, you may want some help. The more investments you own, the harder it is to tell how any one move will affect your overall financial picture.
Start preparing now
It is wise to take several steps before talking with a financial planner, in order to save time and money. For example, over the next month, start thinking about your financial goals. What is your top priority? Do you want to buy a house, or get out of debt? Then, start collecting the records of your financial life.
Think about where your money comes from. Where are your statements of income? Think about where your money goes. What records do you have of debts, mortgages, and other loans? How much money do you put aside for savings?
Think about what your investments and personal possessions are worth. Do you have receipts, appraisals, or estimates?
Think about the protection you have for your assets, your health, your heirs. Pull out your insurance policies. Get a copy of your will or trust.
Think about how much of your income goes for taxes. Taxpayers will pay more this year in total federal, state, and local taxes than for food, clothing, and housing combined, says a Tax Foundation report. Where are your tax returns? What kind of system do you have for filing your expense records and other receipts?
One last tip: Most planners offer a free half-hour or hour of advice before asking you to pay. Try this free consultation. Now you should be ready to meet with a financial planner.
Some organizations that can help you find a financial planner
· The Institute of Certified Financial Planners (1-800-282-7526) will provide a list of planners in your area, plus information to help you choose a planner.
· The International Association for Financial Planning (1-800-945-4237) will provide a list of planners in your area plus information to help you choose a planner.
· The National Association of Personal Financial Advisors (1-888-333-6659) will provide names of fee-only planners in your area who are paid only by the client, and do not receive commissions from investments they recommend.
The Securities and Exchange Commission (1-800-732-0330) and the Kentucky Department of Financial Institutions (1-800-223-2579) can tell you if a financial planner is registered as an investment advisor. They also can tell you if complaints have been filed against the planner.