Today, the field of financial planning is growing in popularity, with more people than ever working to create some type of financial plan for their future. For those who possess little understanding of the financial industry, financial planning can be overwhelming and difficult. In these cases, it might be prudent to seek the services of a financial professional, such as a financial planner or a financial advisor, to help you. What do financial professionals do and how can they help you with your finances?
Financial Planners and Financial Advisors
When looking for a financial professional to assist you in planning your finances, you will encounter two common types: financial planners and financial advisors. For those who are unfamiliar with the financial industry, they might sound interchangeable, but are, in fact, quite similar. However, there are a few key differences that you should be aware of when choosing which type of financial professional you should work with regarding your finances.
The term “financial advisor” is the broader of the two. Financial planners can be financial advisors, but not all financial advisors are financial planners. Financial advisors can obtain more than 100 different types of certifications. These professionals can help you to manage your money and investments in a broader sense, serving as close partners throughout the financial planning process. Together, you may highlight a wide array of financial topics.
The term “financial planner” is specific to financial professionals who help companies or individuals when creating a financial plan designed to meet their long-term monetary goals. These professionals may focus on certain areas of finance in order to better assist clients with their specific needs.
No matter which type of financial professional you choose to work with, they will typically ask you to complete a financial health questionnaire of some kind. This will give them a more complete look at your finances, thus enabling them to offer you relevant and helpful advice.
Benefits of Working with a Financial Professional
A financial professional can help anyone, regardless of their income level—especially when it comes to helping them to achieve their long-term financial goals. Financial advisors leverage their industry knowledge to give their clients relevant advice regarding investment opportunities, tax strategies, insurance, bulking up savings, and creating a functional budget. It is that knowledge that can prove most beneficial to you, particularly if you lack knowledge in a particular area of your finances.
Both financial advisors and financial planners are helpful when you’re seeking to attain specific financial goals. They could include aspects such as saving for a down payment on your first home or your child’s college education, or paying down student loan debt. Financial advisors can help you with these long-term goals, as well, but they can also advise you on shorter-term goals like tackling credit card debt or establishing an emergency fund.
Most financial professionals recommend that people create a budget to manage their finances, but this isn’t always easy. Establishing a budget that you can successfully follow requires financial planning. With the help of a financial professional, you can develop a budget that will accommodate your specific lifestyle, whether you are able to set aside a large amount of money each month, or you live paycheck to paycheck and saving is a distant dream. You can adjust your budget to meet any monetary goal, and a financial advisor can help you to determine where you should be putting your money as you seek to achieve that goal.
If you decide to work with a financial planner or a financial advisor for the long-term, then they will most likely set up regular sessions with you to check in on the state of your finances. This is important because your finances and personal situation will change over time. To get the most out of your financial plan, you need to regularly take stock of your financial situation.
You may think that the services of a financial professional do not fit into your budget, but you don’t necessarily need to pay for financial advice in the long term. Depending on the type of advice you need, it may be possible to hire a financial professional for only a few sessions. For instance, you can enlist their services to develop a financial plan or to consult with them before starting a family or retiring.
Working with a financial planner or a financial advisor can guide you through a variety of financial situations. Whether you are planning for retirement, seeking investment advice, or paying off debt, these professionals can advise you in making the most effective financial decisions for you and your family.