Author Topic: Hiring a financial planner: anti-mustachian?  (Read 5792 times)

Freedom2016

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Hiring a financial planner: anti-mustachian?
« on: February 28, 2012, 02:46:54 PM »
By way of background, I am pretty new to the frugality / personal finance / early retirement blogging community. Not that the general principle of "spend less than you earn" had escaped me prior to finding this online community of writers, but my savings side of it has been...well...lame. Quite frankly, for the last several years, I've frittered away a lot of income that I could have been saving and investing on restaurants, trips, hobbies, clothes, etc. (A rather typical urban consumer, and pretty far from being a mustachian.) At the time, I felt fine about it because I always paid my CC's off each month. My husband, too, had a similar money mindset...while he was decent about staying out of debt (also paying off CC's each month), he also brought little by way of savings/investments into our marriage.

Some of our current numbers: Our non-mortgage debt is my $37.5 consolidated student loan from grad school (3.13% interest) and a $15k interest-free loan my husband received from his mother. We have 2 paid off cars and a mortgage. We also have 31.5K in an emergency/float fund, 2k in a sinking fund for car insurance, repairs, etc, and about $180k in retirement savings & investments. On the income side of things, I'm a partner in a small consulting firm but for all practical purposes, I run my own business and I have fluctuating income month-to-month as well as year-to-year (hence the float fund). Husband's income is stable.

Cut to some months ago, when I got pregnant and we realized that my income, in particular, was going to diminish significantly in 2012. To be conservative, I estimated my annual income would drop by 50% compared to my 2011 income, which was an unusually high income year.

It was this expected (and significant) contraction of our 2012 household income that forced us to really start looking seriously at our finances and we started talking about consulting a financial planner to help us figure out how to move forward. This is also what inspired me to start looking online for whatever I could find about money management.

I've since been devouring information from all kinds of sources, and as resident "CFO" in my marriage, I've been working hard to put together budgets and budget reports that will help us track everything we're doing. Luckily I had been using Quicken for all of 2011 so I had good data on where we spent our money. I've thus got a good handle on how/where we can reduce spending categories for 2012, and I feel confident we can make the numbers work this year to keep us out of further debt and keep funding H's retirement fund. I am willing to make the spending changes it will take to make that happen, though my husband has been more reluctant to embrace the reductions I've recommended.

I also expect 2012 to be an unusually low income year, so I'm optimistic that 2013 will see my income go up by at least 25% over 2012, if not return to 2011-like levels (due to some new income streams I am thinking of developing). This should both loosen the purse strings a bit for more "fun" but also enable us to pay off our non-mortgage debt.

So here's the question: for the last several months we have talked about meeting with an independent financial planner/advisor (one that is highly recommended by close friends of ours whom I know to be good money managers themselves), but now that I have spent so much time reading online, I am questioning whether we need that outside expertise. Is it anti-mustachian to spend money getting professional advice from a financial planner?
« Last Edit: February 28, 2012, 02:56:32 PM by course11 »

AJ

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Re: Hiring a financial planner: anti-mustachian?
« Reply #1 on: February 28, 2012, 04:18:24 PM »
idk...I question the value of a financial planner for folks who 1) make a somewhat average income and 2) have dedicated a handful of their braincells to personal finance. I think if you win the lottery, or otherwise suddenly come into a lot of cash you should hire someone to help you with that. Otherwise, if you are reasonably intelligent and willing to read and learn, I'm not sure how much a planner would help. There was another post about a financial planner whose own finances were a wreck. If he was giving out the same advice he was taking, he probably hurt a lot of people. That being said, though, I have never used one myself, so I could be way off base.

arebelspy

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Re: Hiring a financial planner: anti-mustachian?
« Reply #2 on: February 29, 2012, 08:23:37 AM »
Paying for professional advice - lawyer, doctor, accountant, etc. - isn't anti-Mustachian at it's core.  Mindlessly doing so may be.

Most financial planners are just people selling products.  Many don't even know what they're talking about.  Go read the thread about how a financial pro lost their house: http://www.mrmoneymustache.com/forum/antimustachian-wall-of-shame-and-comedy/how-a-financial-pro-lost-his-house

Be very wary when hiring a financial planner.  In general I think asking questions on a forum like this one (or early-retirement.org) will get you much better advice, for free, without someone trying to sell you something.  But no, it's not necessarily the case that hiring one is anti-Mustachian, by definition.
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velocistar237

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Re: Hiring a financial planner: anti-mustachian?
« Reply #3 on: February 29, 2012, 08:56:00 AM »
You would benefit far more from learning the issues yourself than by outsourcing this task to someone else, and that knowledge would serve you well in the future. If you learn the basics from the MMM site, the forum, and some recommended books, you would probably not learn much from a planner. Besides, I find that most of the challenges with early retirement are not about knowing what to do. The mechanics are simple; ERE even has a 21-day makeover. The hard part is keeping the expenses down when you start to push your comfort level, or when friends and family start to notice that you're not treading the path they expect.

It looks like you're not afraid to share your financials. Try starting a journal. That's probably all you need.

If you decide to go through with it, let us know how it goes, especially the look on the planner's face when you say you want to retire within ten years. Maybe someday, there will be planners who specialize in the MMM/ERE way. (They would be retired already, so it's not like it would hurt them if they had very few clients.) Try to find a fee-only planner. Many financial planners earn commissions by selling specific funds to their clients, which creates a conflict of interest, but I have read that a fee-only planner would risk losing their certification if they did this.

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Re: Hiring a financial planner: anti-mustachian?
« Reply #4 on: February 29, 2012, 12:34:05 PM »

Most financial planners are just people selling products.  Many don't even know what they're talking about.  Go read the thread about how a financial pro lost their house: http://www.mrmoneymustache.com/forum/antimustachian-wall-of-shame-and-comedy/how-a-financial-pro-lost-his-house

I couldn't agree with that more.

Freedom2016

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Re: Hiring a financial planner: anti-mustachian?
« Reply #5 on: March 02, 2012, 11:42:20 AM »
Thanks for all the input. I'm definitely aware of the potential biases and weaknesses of financial planners (I'd never go with an Ameriprise type person!). The guy our friends recommended is straight up fee-based. He doesn't sell investment products.

One of our challenges is that my husband and I are not yet on the same page about our financial goals and priorities. In that sense, it may actually be worth the expense to have an outside "expert" reiterate some of the things I have been trying to communicate to him!

AJ

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Re: Hiring a financial planner: anti-mustachian?
« Reply #6 on: March 02, 2012, 01:09:47 PM »
One of our challenges is that my husband and I are not yet on the same page about our financial goals and priorities. In that sense, it may actually be worth the expense to have an outside "expert" reiterate some of the things I have been trying to communicate to him!

That alone would be worth the cost! When I was trying to get DH on board with a financial plan, I asked him to take the Dave Ramsey class with me. I knew I didn't need the info (having read his books, I knew what he was going to say), but I also knew that going through it together would be good for us. It totally was! We didn't really get any new info out of it, and we're not DR die-hards, and it was painful forking over the $100, but it was 100% worth it. It just synced us up on our goals. We had talked about the stuff before, but DH really got on board hearing it from someone else. I don't know how much your planner will charge you, but if it gets you two on the same page it will probably pay for itself in the long run.

mb196

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Re: Hiring a financial planner: anti-mustachian?
« Reply #7 on: March 02, 2012, 01:19:09 PM »
Read Dave Ramsey's "More Than Enough" with your husband.  It's a great start and it's not ALL about money at all.  Better yet, since you are obviously far more advanced than him when it comes to Personal Finance, you read it first, and then hand the book to him.  It's one of the best books I've read on PF, and I've probably read over 100.

Every chapter can help you start a great conversation.


arebelspy

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Re: Hiring a financial planner: anti-mustachian?
« Reply #8 on: March 02, 2012, 02:36:35 PM »
Read Dave Ramsey's "More Than Enough" with your husband.  It's a great start and it's not ALL about money at all.  Better yet, since you are obviously far more advanced than him when it comes to Personal Finance, you read it first, and then hand the book to him.  It's one of the best books I've read on PF, and I've probably read over 100.

Every chapter can help you start a great conversation.

(Emphasis mine.)

I'm not a big Ramsey fan based on most of the stuff I've heard of him, but just based on the bolded part above, I added it to my list.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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kaeldra

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Re: Hiring a financial planner: anti-mustachian?
« Reply #9 on: March 02, 2012, 03:47:31 PM »
I hired a fee-only financial planner in 2010 for advice (2.5 hours of work, including one meeting, at $200/hour) after inheriting a chunk of money. NAPFA lists members, and you can email or call them ahead of time with questions (I believe I found some recommended questions on their site).

My situation was relatively uncomplicated - single, 23, no debt, no house, owned a car - and I had been reading Get Rich Slowly, so I wasn't entirely clueless, but not yet aware of early retirement. I found it worthwhile to get advice, although now I know more and wouldn't have needed the info I got. I am considering meeting with someone again this year to discuss my updated situation and goals (buying a house while planning for early retirement). I think going in with a clear idea of what you want out of it / list of questions would be good.

Before we met, the adviser had me fill out a budget and inventory of my assets and debts to help assess my situation. That might be good to work through with your husband - really seeing the numbers and accounts laid out was helpful for me. In my case, I was advised to consolidate my accounts (I had money scattered around all sorts of financial institutions), read The Coffeehouse Investor (book about index funds), purchase index funds while planning for flexibility on buying a new car and possibly returning to grad school, max out my IRA, spend a small percentage of what I inherited and save the rest, and create a will. EDIT: he also made me a plan of action and made me check in with him to be sure I'd completed my tasks.

TL;DR: It wasn't quite what I had had in mind, but it was helpful for getting my affairs in order, and I am considering meeting with a financial adviser again.
« Last Edit: March 02, 2012, 03:50:04 PM by kaeldra »

MacGyverIt

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Re: Hiring a financial planner: anti-mustachian?
« Reply #10 on: March 03, 2012, 07:11:19 AM »
I've had a financial planner for a couple of years now.

All though I've done a lot of reading on the FP issue I'm not yet comfortable with handling the investments on my own. Still at that stage of reading and re-reading remarks about investments and whatnot several times b/c it doesn't sink into my brain with ease.

It's not a lot of money for now, he's got my Roth and an additional $400 a month for my investment portfolio and I am pleased with the results I've been getting over the years. Maybe I'll make this a goal for 2012, to get to the point of comfort that I can consider taking this on myself.

Since I spend almost every day reading things FI related, I'm not sure what benchmark I could hit to get to the "ready to take it on myself" point....? Any ideas or suggestions on when you felt the comfort level to take it on yourself?

arebelspy

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Re: Hiring a financial planner: anti-mustachian?
« Reply #11 on: March 03, 2012, 01:10:57 PM »
The last post, combined with the username posting it, tickled me.  :D

MacGyver, why not start now with a small investment you handle on your own?  Let your guy do his thing, but stat getting comfortable by opening your own Vanguard account.

As you gain knowledge and experience, you can take over those other accounts as well.
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Parizade

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Re: Hiring a financial planner: anti-mustachian?
« Reply #12 on: March 07, 2012, 05:18:33 AM »
I went to a financial planner for the first time a few weeks ago. She was highly recommended and does not charge you anything unless she helps you make money. She takes a percentage of your earnings if and when she helps you increase them.

So I gave her all my info, she looked it over, and we talked again yesterday. She said I was already doing all the right things with my investments and she could not recommend any improvements.

I was certainly glad I hadn't paid her up front for that, I would have been annoyed. As it is I can just be flattered instead.

arebelspy

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Re: Hiring a financial planner: anti-mustachian?
« Reply #13 on: March 07, 2012, 07:57:21 AM »
I went to a financial planner for the first time a few weeks ago. She was highly recommended and does not charge you anything unless she helps you make money. She takes a percentage of your earnings if and when she helps you increase them.

So I gave her all my info, she looked it over, and we talked again yesterday. She said I was already doing all the right things with my investments and she could not recommend any improvements.

I was certainly glad I hadn't paid her up front for that, I would have been annoyed. As it is I can just be flattered instead.

That sounds like a legitimately helpful person, I'm impressed and surprised.  Also way to go you for doing stuff the right way already!
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

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Re: Hiring a financial planner: anti-mustachian?
« Reply #14 on: March 07, 2012, 08:32:29 AM »

Would recommend only ever going fee only.

Its somewhat like paying to go to a personal trainer. They'll force you to do the necessary methodical stuff - income, assets, budget, goals, cash & debt consolidation, etc, which is perhaps the most useful part. And they should know the Roths/IRAs/401k/etc complexity.

So a one-off consultation with a good IFP sounds worth it for those with no financial skills. Just avoid all the crazy investment stuff, and mainly go index. And don't let them manage your money, get them to set you up on Vanguard.

Good Luck!

Mr Mark

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Re: Hiring a financial planner: anti-mustachian?
« Reply #15 on: March 07, 2012, 09:40:31 AM »

Here's a good generic '10 questions for choosing a Financial Advisor. Right on time!

http://www.cbsnews.com/8334-505146_162-57392321/how-to-choose-a-financial-advisor-10-questions/?pageNum=11&tag=next