"So many people come to us undergoing financial trouble and believe they will be walk out absolutely problem-free," says Deana Arnett, a certified financial planner and senior planning- expert at Rosenthal Wealth Management Group. "We can help them discover their needs and design the best financial and investment program; but the whole thing will only benefit then if they also become proactive."
In terms of financial planning, Amanda Gift, a financial consultant working with Signature, advises her clients about the many variables that cannot be manipulated in the investment environment, although they can control their spending. “You cannot be in charge of what the economy will do or which direction the stock market is going to; but you can manage your expenses and what you buy and what you do not buy.”
Here are some guidelines that money experts want their clients to follow to achieve financial stability:
We Can Only Do So Much
The most efficient financial plans will only be effective if they are implemented by the client.
“A lot of people visit a financial adviser, and then after lengthy talks, get a book full of glossy paper with colourful charts that end up on the book stand, not put to practical use,” says Arnett.
Your Beneficiary Entitlements Could Disappear
Mike Piershale, president of Piershale Financial Group, states that many bank mergers during the 2008 financial crisis left numerous once-designated accounts, such as 401(k)s and IRAs, without a beneficiary.
“After these mergers, we have found several instances where the account beneficiary has been lost in the process of transfer; so we inform everyone who designated a beneficiary in the past seven years to look and make certain the beneficiary still exists.”
I Cannot Give Advice on Your Risk Tolerance
Piershale says financial advisors do not have the right to tell clients the level of risk should undergo when investing.
“We can only assist you how you can gage your risk tolerance, and then suggest a portfolio that matches your objectives.”
Once a client’s risk level is determined, Piershale states that the job of the professional advisers is to produce the best tax-friendly investment strategies. “Closing in on the right investment, in the right account, will enhance your tax savings.”
Your Emergency Savings are too High
Financial consultants agree that each person should have a minimum of six months of living expenses saved up and which can be easily accessed; but beyond that figure, you could be missing investment potential.
“Whenever I see so much money funnelled into a savings account which is making very little interest, I ask my clients if they are maximizing their opportunity to enhance their retirement accounts and after that, I suggest that they put their idle surplus cash sleeping in their checking account to a wiser investment alternative."
You are living far above Your Means
Gift reveals that many people often underestimate how much they are spending – more so in terms of high-price purchases.
“Usually, when people purchase things on a monthly instalment basis, they fail to see how much it will add up to after one year. They say, ‘Oh, $400 a month is not so much’; but they forget that it amounts to almost $5,000 in a year,” says Gift.
You Must Have an Estate Plan. . . No Matter How Old You Are
So many people look at an estate plan as a thing designed only for the rich, says Piershale; but he says every parent or anyone with whatever amount of assets should produce an estate plan.
“You want to ascertain that your assets are transferred to the people you desire to be benefitted, and more especially, you want to designate a guardian for your children in case the unthinkable does happen.”
Professional Financial Advice is not only for the Rich.
“The individuals who possess bizzillion dollars are not the persons who need me,” declares Arnett. “The stakes are so much greater when you have limited resources; because if you err in handling $50,000, the damage is much more catastrophic than when you do with $150,000.”