Tax Refund or Bonus: Hire a Financial Planner
For about $2,400, you can get a detailed plan that can calm your money jitters
In a survey of more than 1,600 workers, nearly 60% identified financial matters as their top stress. The next most-common stress was “my job” at a very distant 15%.
Every household has its own list of financial stress points, but there are some common anxiety-inducers:
Building an emergency fund
Getting a handle on credit card debt
Being able to consistently pay the bills, on time
Sending kids to college without sending you to the eternal poorhouse
Meeting the daunting challenge of building retirement savings that match your life expectancy
If any or all of those resonated with you, you might consider making an investment in hiring a financial pro to help you hatch a long-term plan for tackling your challenges and building financial security.
Don’t presume planners are out of your league. There are plenty of financial planners you can hire to work up a financial plan without having to sign on to have them manage your money, too, for an additional fee. In other words, you don't need to have a big sum stuffed in retirement and investment accounts to work with a financial planner.
According to research from Michael Kitces, a thought leader in financial planning circles, the median cost to have a pro size up where you’re at and where you want to get to, and then hatch a plan to get you there is $2,400. (If you want an ongoing relationship, there are all sorts of fee structures, ranging from hourly to a retainer fee or the “assets under management” approach, if you indeed hand over management of your investments.)
Granted, $2,000 or so is not nothing. But a good plan can save you so much more and give you so much more. Given all the moving pieces to our financial lives, it can be overwhelming to know where to start, how to prioritize and, ultimately, how to become a master juggler of various goals. Those are core services a financial planner provides. Establishing an ongoing relationship with a planner can also pay off by helping you navigate all the psychological and emotional bad habits that can get in the way of financial success.
If you got a year-end bonus, earmarking it to help pay for a financial planner could be a great 2020 investment. Or, if you expect a tax refund, that might cover the bill. Last year, the average refund on federal returns was $2,725 according to the IRS.
Friends, families and colleagues can be good sources for referrals. Just keep in mind that you need to carefully vet a financial planner, not just to confirm they are qualified. Only hire someone who works as a fiduciary. Also, interview candidates to see that they are a good fit. During interviews, explain your main stress points and ask how much of their time is spent helping clients with those concerns.
If you don’t have any personal references, you can search online for fiduciaries who are part of the Garrett Planning Network or the XYPlanning Network, where member planners specialize in working with Gen X and Gen Y clients, with no investment minimums required.
In a recent survey by Northwestern Mutual, two-thirds of people who work with a pro said they feel very financially secure, compared with less than one-third of people surveyed who are winging it.
Moreover, seven in 10 survey participants who work with a pro said they are happy with their life, compared with 50% of people without professional financial help. That suggests spending some money on getting money help might indeed buy more happiness, which we all know is a very valuable return on investment.