financial planning l by amanda becker
Meet Your Money Match The intricacies of managing your finances are never-ending. It’s important to know and understand the relationship you have with your finances before you jump into a relationship with a financial adviser. These five helpful hints from National Association of Financial Planners representative David Diesslin will help you get off to a great start with your financial adviser.
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1 Be aware of recurring expenses.
2 Know your must-haves.
According to Diesslin, one of the most common untruths he hears from clients involves one-time expenses. He recommends taking a hard look into your finances and being honest with yourself to determine what is actually a one-time expense — vacations or long-lasting home items such as furniture or appliances — and what is recurring, such as car payments or cable bills. You can’t have a successful partnership with your financial adviser if you are dishonest with yourself and how you spend your money.
Your financial adviser will ask you to explain your spending and may recommend you cut expenses. Before your first meeting, Diesslin suggests you examine what is a need versus a want. Needs are items that are necessary for your survival. Wants are items that you desire, but do not impact your survival. Often, wants are perceived as needs and leave the spender living beyond his or her means. Furthermore, the needs and wants for one person are different for another. For example, one person may need an Internet connection to make a living, while another might just want it for entertainment purposes.
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4 Know your capacity for fiscal risks. According to Diesslin, it’s important to take risks to grow your portfolio, but if you are not financially capable to follow through with those risks, you won’t be successful. Be honest with your financial adviser about what you think you are financially capable of achieving; this honesty will help you take appropriate investment risks.
3 Know your adviser. Do background research before picking an adviser. Diesslin recommends researching whether you’ll be a customer or a client. If you are a customer with a brokerage firm, your adviser may have another agenda, such as trying to convince you to sign up for other services and products. These add-ons will come at an additional cost, and may or may not be something you need. On the other hand, if you are a client with a fee-only financial planner, you will receive full disclosure from your adviser.
5 Know your emotional capacity for fiscal risks. Capital is important for risks, but so is mental state. According to Diesslin, if you take a fiscal risk before you are ready, you run the risk of selling at the wrong time, which could result in a financial setback. Just as you shouldn’t take a financial risk if you don’t have the appropriate capital, don’t leap before you’re emotionally ready to support your decision. The bigger the financial input, the larger the emotional investment will be.
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inside columbia may 2014