What is a Financial Planner, and When You Should or Shouldn’t Hire One?

Have you ever thought that hiring someone to tell you what to do with your money seems ludicrous, but you don’t the first thing about insurance or how to best use the exemptions available to you to get a tax break or any other financial decision that baffles the regular Joe? You’re not alone, but that doesn’t mean you’re right!

That’s not to say you can’t navigate your finances by yourself, but getting the help of a professional can make things go over much more smoothly. A financial planner can help you navigate the simple and complex financial circumstances that come your way as you go through life. They help avoid the learning curve when it comes to growing your wealth, and/or to manage an unexpected situation in a streamlined fashion.

What is a Financial Planner?

A financial planner is an industry professional who advises individuals and companies who are planning their fiscal futures. They help you navigate various money-based decisions, from investing and buying stock to helping you save money in order to reach a financial goal or retirement.

Many people use the terms “financial advisory” and “financial planner” interchangeably, but they are two different types of professionals. The former encompasses a broader range of people who help clients through money matters such as investment, real estate, life insurance, tax planning, or even making large purchases. Such professionals are required to hold special licenses to work with the public.

Financial planners, on the other hand, are not legally obliged to hold any licenses. Nevertheless, many of them do have such licenses and special certifications and are highly trained and experienced in the finance field. There are some areas of advising that require the professional to uphold certain legal requirements, regardless of the title behind their name. A lot of the time, the work done by financial planners and financial advisors can be the same.

So, when should you hire a financial planner?

Well, you can do so at any point in time, but here are some important situations in which it would be a

You Plan on Retiring Soon

If you are at, or close to, retiring age, you might benefit from the advice of a financial planner. One of the biggest milestones of a person’s life – especially in relation to money – is retirement. People find themselves asking several questions like “Do I have enough money to retire? Can I continue earning without working full time? How can I save more?” Financial planners can help you get the answer to these questions in a hassle-free manner.

You Got a Big Promotion/Raise

It can be overwhelming to decide what to do with a significant amount of “extra” money coming in all of a sudden. Most people, often because they don’t know what to do with it, tend to focus on increasing their current quality of life, but you could also use it to increase your wealth and improve your future financial standing. Financial planners can be the best resource to help you figure out how and where to invest your money to reach future goals in the best possible way.

You Received Inheritance

Just like in the instance of a raise, receiving an inheritance can mean that you have a lot more wealth to your name in the blink of an eye. You have to figure out how best to invest or take care of what has been left for you by your loved one, and the best way to do that is with the help of a professional. On top of dealing with finances, you may also be dealing with the loss of a loved one, and you would want to ensure that their final financial wishes are fulfilled as well.

You’re Getting Divorced

Divorce is another (unfortunate) life circumstance that is supercharged with emotion and also affects your finances immensely. You’ll have to figure out how to divide your shared assets in a fair manner. Individually, you should be aware of how you can protect yourself and also make decisions on relocating your assets. Such decisions can be made much more easily with the helpful advice of a financial professional.

There’s Been a Major Life Event

More often than not, major life events come hand in hand with major financial changes. For instance, moving to another place, getting a new job or raise, getting married, having a baby, or starting a business, are all going to require some life-affirming financial decisions that will impact your and your loved ones’ futures. And these aren’t decisions to be taken lightly, so getting the help of a financial planner would be a good idea.

You’re Ready to Take Control of Your Life

You don’t need to have any major events happen to want to take control of your life and finances, so any time you feel like you need to is the right time to hire a financial planner! You may want to set new goals and make a plan or amend an existing plan to better suit your current situation – whatever it is, a professional can help you figure things out.

When You Don’t Need a Financial Planner

You don’t always have to hire a financial planner. It is an extra expense that some people cannot afford, and for them, their unique situation may not benefit from it either.

You Live Paycheck to Paycheck

In such a situation, you should look to make a basic financial plan for yourself instead of hiring a financial planner. You should look into budgeting, cost-cutting, and saving, most importantly. Once you’ve caught up with them and manage to set aside some money for growth, you can look for the help of a professional.

You Have a Lot of Debt

A financial planner mostly focuses on helping you grow your wealth, and as someone in debt, your main area of concern should be getting out of it. Plus, financial planners don’t come for free – it’s not a justifiable expense at such an instance. Instead, you should seek the advice of a credit counselor or similar financial professional who specializes in helping people become debt-free. Once you’ve stabilized your financial situation, you can then focus on growing your wealth for the future.

You Already Know What You’re Doing

As with any profession where an expert wouldn’t hire another expert to make decisions for him/her, you do not need a financial planner if you have extensive knowledge about money matters. However, it can’t hurt to get the help of one if you need to make a quick decision and you’re short on time, or you want to test the cogency of your existing plan through the second set of eyes.