5 Questions You Are Not Asking A Financial Planner (But Should Be)
In this age of information overload, there’s no lack of answers to our burning financial questions. But finding the answers that will optimize our financial lives isn’t just about muddling through articles and news reports; it’s about asking the right questions of the right person.
Here are 5 questions you should be asking your financial planner:
1. HOW DO I PLAN FOR MY CHILDREN’S COLLEGE EDUCATION WITHOUT BREAKING THE BANK?
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Have you looked at college costs lately?
You’re looking at $187,800 for four years at a private college. But with college costs estimated to rise 5% per year, in five years that amount increases to $239,685—almost $60,000 a year! (1)
You have a better choice if you act now.
Start using the power of compound interest to your advantage… now!
Think of it this way…
You have the choice of saving NOW and earning interest, or borrowing LATER and paying interest.
Here’s a sneak peek at power of compound interest in action:
If you invest $4,000 in a market earning an average return of 7%, it would be worth $7,869 in 10 years.
If you saved $4,000 annually for 10 years at this return, your college fund would have $59,134!
There are multiple ways you can save for this significant investment, with 529 tax-advantaged college plans being the most popular. They offer a unique combination of features that no other college savings vehicle can match.
If your kids are heading to college within the next few years, don’t panic about the amount in your savings accounts. There are tried-and-true ways to maximize your financial aid potential and minimize your child’s student debt load. Check those out here and here!
Bottom line: College planning should be a part of your overall financial plan. Cover your bases by talking to your financial planner and getting advice tailored to your situation.
2. I WANT TO BUY A HOUSE. HOW MUCH CAN I AFFORD?
We often rely on our financial planners to help us get to retirement, but they also offer valuable advice and experience that can help us with everyday decisions, like buying a house!
If you are not asking a financial planner about how much house you can afford when buying, YOU SHOULD BE! (We can help!)
You could use an online calculator to get an idea of how much you may be able to spend, however an online calculator does not take into account what your other goals are outside of owning a house!
Goals like:
- Do you want to travel?
- Retire early?
- Be financially independent?
- Fully fund your children’s education?
All of these factors impact how much of your monthly income you can spend on housing costs. A financial planner will be able to look at your big picture and goals and give you a realistic number that will make sure you have money left over for the other dreams you want to finance in your life.
Also, here’s something a smart financial planner may help you see…
Maybe buying a home isn’t the best idea for you.
Renting sometimes gets a bad rap, but it helps you avoid a lot of extra expenses that could affect how much money you can put toward achieving other goals. As home prices rise in many U.S. markets, renting gives you predictable expenses and allows more flexibility if you decide to move or if an enticing job offer comes your way.
3. SHOULD I COMBINE ACCOUNTS WITH MY SPOUSE?
If you Google this question, you’re going to get a lot of divided answers. There are some people who are happier having separate accounts, and others who prefer the simplicity of joint accounts.
Joint accounts offer convenience and help both parties stay on top of their finances while also preventing legal headaches in the case of a death.
On the other hand, separate accounts give each spouse freedom over how they spend their money. If one or both spouses entered the relationship with debt or unequal accounts, staying separate can avoid resentment in the spouse who has to take on this extra responsibility. And, of course, if the relationship ends, separate accounts are just easier to deal with.
Hiring a quality financial planner can help you answer complicated questions like this.
Your financial planner will know YOU and your life circumstances enough to be able to give you objective guidance that is in your best interest. Unfortunately, most internet searches cannot take your unique circumstances into account.
Financial planners are here to help you with the big and the little, so don’t be afraid to ask any financial questions you have, even if they seem mundane and simple.
4. HOW MUCH DO I NEED TO RETIRE?
This is a big one, and probably at the top of your mind.
There’s a lot of conventional wisdom out there, like saving $1 million or building a nest egg that equals 10 times your current income, but the ideal retirement number is going to be different for everyone.
Here are some factors to consider when determining how much savings is right for you.
First, you’ll need to examine your living expenses and think about what you want your retirement lifestyle to look like.
You will also need to consider your longevity risk—how long you will live and how much your health and long-term care expenses may be affected by your life expectancy.
Even though the current life expectancy for men is 84.3 and 86.7 for women, (2) there is a 43% chance that individuals who are 65 today could live till 95. (3) Your savings needs to last as long as you do.
If you ask a financial planner this particular question, they will look into every area of your life, factor in all the details, and project multiple scenarios to prepare you for this milestone.
You don’t need to crunch numbers alone. Having a financial expert by your side can help make the process less stressful and more reassuring.
5. WHAT COULD HAPPEN TO MY INVESTMENTS IF THE MARKET CRASHES?
Everyone was happy in 2017 when their portfolios were drastically rising and the markets were hitting record highs on the regular.
But when the markets decline… we find out if our investments are allocated properly.
Everyone has their own unique risk number, based on their tolerance for risk and their time horizon. At Archer Investment Management, we walk our clients through an exercise that helps us identify their risk number and create a portfolio that aligns with their risk tolerance.
Based on your risk number, we can project your expected annual return on your investments and explore how much your portfolio might fall in different market scenarios.
You don’t have to wonder or worry about what could happen if the market crashes. We can’t predict perfectly, but we can give you a ballpark idea based on what’s happened in the past.
Setting clear expectations before investing is crucial to staying the course when challenges arise.
STILL HAVE QUESTIONS?
If there’s one thing that’s guaranteed, it’s that you will have plenty of financial questions and concerns as you move through life.
At Archer Investment Management, we want to be an objective resource for you as you seek to make the best financial decisions possible.
We invite you to find out how we can help by scheduling a quick call with us to see if we are the right fit!
About Richard
Richard Archer is a financial advisor and the President of Archer Investment Management with more than twenty years of industry experience. He specializes in providing comprehensive financial planning and investment guidance and personalized care and attention to executives with complex compensation and families pursuing financial freedom. Along with holding a Wharton Bachelor of Science in Economics and a Texas MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.
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(1) https://www.northwesternmutual.com/life-and-money/how-much-college-will-cost-in-5-10-and-15-years/
(2) https://www.ssa.gov/planners/lifeexpectancy.html
(3) https://www.aarp.org/work/retirement-planning/info-2015/nest-egg-retirement-amount.html#quest1
