There are many things in life that make sense to do on your own: driving a car, getting dressed, eating, brushing your teeth, shopping for clothes. There are also activities that always are best left to professionals such as filling a cavity, setting a broken bone, or preparing a legal defense to a criminal charge. Then there are a long list of gray-area activities that, depending on your skill level and patience, could be do-it-yourself tasks but also could be done by professionals: changing your oil, remodeling a bathroom, building a treehouse, or breakdancing, to name a few.
Financial planning and investing falls squarely into that third category. There are plenty of people who choose to manage their own finances and there are many more who enlist a professional to handle it on their behalf. Those who do it themselves can often do just fine but is that what you want for your financial future, to do “just fine?”
For example, you may know that you can save money for college in a 529 Education Savings Plan, take it out to pay for education expenses when your child goes to college and all distributions are tax free, including the growth in the account. But did you know that those expenses can include room and board, not just tuition/books? And if your child lives at home while a student you can pay yourself a reasonable amount for their room and board and take that out of the 529 as well, as long as it doesn’t exceed what their college reports on the financial aid disclosures? If you have money in a 529 that is one way to use it up and offset some of your costs.
Further, did you know that some states will give you an income tax deduction for a contribution to a 529 plan? Even if you don’t have one created when your child is in college you can open a 529 (if your state allows a deduction), contribute at least as much as is required to max out the deduction, and then immediately remove the funds to pay for the education costs. The plan allows it and you have received a tax benefit from your state that helps pay for a small portion of the education of your child.
Those are just a couple of items around education planning, one small sliver of the financial planning universe. Having a financial advisor involved in your life gives you access to this type of knowledge multiplied significantly. You can’t possibly keep track of the changes that happen in the financial world, you have a job and many other responsibilities that keep you busy. For a financial advisor, that’s all they do, all day long, so they can fill that gap and provide value to you regularly by being a knowledge and strategy resource as well as handling as much as possible for you.
In the end, life is about choices and time is a finite resource. Once it’s spent it’s gone forever. It takes time to properly manage your finances and for many who choose to do it themselves it can sometimes get pushed down the priority list. When you’ve had a long day at work do you really want to go home and spend an hour researching mutual funds for your retirement account? Or on the phone with the IRS (mostly on hold) to talk with someone about a tax notice? You can put those tasks off until the weekend but wouldn’t you rather plan a fun activity instead?
This is where getting a professional involved can pay dividends. Problem with your tax return? Call your financial advisor. Received a notice from your life insurance company that doesn’t make sense? Call your financial advisor. Worried about the state of the economy or the way the stock market is trending? Call your financial advisor.
This doesn’t mean that because you hire a financial advisor that you should completely ignore what’s happening. Good financial planning work really needs a lot of interaction between you and your advisor, a regular line of communication so that they understand your objectives and can help you develop your goals (at least financially) in life. Remember, an advisor cannot help you achieve your goals if they don’t know what they are.
What it does mean is that with a professional advisor as your partner, you should not have to worry as much because you have someone in your corner, someone who will not only point out the potholes in your financial road but either fill them or navigate a detour to get you around a different way. That should leave you with more of that resource which is precious above all other, greater than silver or gold: time.
If you are interested in talking further about this topic or any other relating to your financial present or future, you can reach out to an advisor at John G. Ullman & Associates, Inc. at any point (www.jgua.com). We are here to help you reclaim your time!