Financial planning options for the 99 percent
Think financial planning is just for those with fat investment portfolios, yachts and vacation homes? Not true. The rest of us have options, from DIY plans to paying for money advice by the month.
"Everyone can benefit from financial planning," says Skip Fleming, a certified financial planner in Colorado, who often works with clients by the hour or project to make planning more affordable.
What is financial planning? It's taking all the pieces of your financial life -- such as budgeting, savings, taxes, insurance and retirement -- looking at them as a whole and outlining steps to reach your goals, according to the Consumer Guide to Financial Planning from the CFP Board, an organization that sets standards for certified financial planners. Goals can range from retirement to saving for college to wanting to make sure you have all the right kinds and levels of insurance coverage.
You can get a comprehensive financial plan from a fee-only financial planner, who charges you directly and does not make commissions on products, but it's not cheap. A typical plan can cost $2,000 or more, according to Hull Financial Planning in Texas.
The fee-only model of financial planning offers an alternative to the traditional financial planning model, in which advisers provide free advice but earn commissions by selling financial products. Personal finance experts typically advise consumers to avoid these planners due to conflicts of interest and hidden fees.
However, if the cost of a full financial plan is too steep, there's good news: You might not need one, says Pam Horack, a North Carolina-based certified financial planner.
"When you don't have a lot of money, your planning is less complex," she says.
Financial planning for everyone else
So, how can you get a financial plan in place without shelling out big bucks? Here are four financial planning options that won't cost you a fortune:
1. Go DIY. If you're tech savvy and willing to put time and effort into managing your money, you can use online tools to create your own plan. One example: the Web-based online financial planner eFinPlan.com offers a 60-page financial plan and starts at $99 a year.
Another option, PersonalCapital.com, offers a free tool that lets you manage all the pieces of your financial life from an online dashboard. In addition to its free online services, PersonalCapital.com also offers investment management services at a cost of .89 percent of assets managed per year for the first $1 million. "There are a lot of do-it-yourself options," says Katie Brewer, a Texas-based certified financial planner.
2. Take a financial planning class. If you don't mind sitting through multiple lessons, a class can be a good option, Brewer says. You can attend free classes at Financial Planning Days, a yearly event in cities across the country that also offers free one-on-one counseling sessions from certified financial planners, says Sophia Bera, a certified financial planner in Minnesota who specializes in planning for Generation Y clients.
Or, you might be able to find a group class taught by financial planner in your area. For example, Horack offers a four-week class for $450. She covers all aspects of financial planning and answers student questions along the way. "It's a very cost-effective way of ending up with a comprehensive financial plan," she says.
3. Hire a pro by the project. If you want professional advice on one aspect of your financial life, you can hire a fee-only planner by the hour or project. Some planners offer mini-plans at a fraction of the cost of a comprehensive one. For example, Bera offers a one-time planning session that can cover two topics for $499, she says.
This method is most efficient and cost-effective when you go in with a specific idea of what you want, Horack says. "If you say, 'I want a plan to pay off all my college debt,' that's good, that's very specific," she said. "That way, the planner can figure that out without figuring out 15 other things along the way.
4. Pay a monthly retainer. Would you prefer to pay for financial planning the same way you pay your cellphone bill? Well, the monthly retainer model of financial planning is becoming more common. "It's a way to pay for advice that actually fits the cash flow of consumers," says Michael Kitces, a co-founder and partner in the XY Planning Network, a network of financial planners who focus on Generation X and Y clients and offer retainer payment options.
Planners who offer this payment method sometimes charge an upfront fee and typically charge from $99 to $199 a month, says Bera, who offers the option.
As an alternative, LearnVest.com offers a planning service for $299 initially, then $19 a month. If you pay monthly, you can ask questions as they arise and get help on matters such as sorting through your employer's benefits package, Bera says. "There's a huge value in being able to work the cost into your monthly budget and do planning throughout the year," she says.
Finding the right financial planner for you
If you're middle class, living paycheck-to-paycheck or deep in debt, there are planners who won't be a good match for you.
Some planners work only with wealthy clients, and some have a minimum account size or asset requirement of $500,000 or more. "It is, unfortunately, common in the industry to have minimums," says Gil Armour, a California certified financial planner.
However, with a little legwork, you should be able to find a planner who's right for you. Here are three steps to take to find a planner:
- Decide whether you're open to remote planning. If you're willing to do a planning session via Skype or Google Hangout, you'll have a few more options. For example, Bera says she works with clients across the country.
- Make a list of candidates. One place to find planners: the National Association of Personal Financial Advisors, an association of fee-only planners. If you get names from NAPFA, you'll have to visit their websites or call to see if they have minimum requirements, Brewer says. "Unless you do research, there's no way to know if that person works with $1 million accounts or anybody and everybody." Or, the Garrett Planning Network, a nationwide network of fee-only planners that provide planning on an hourly, as-needed basis, offers an adviser finder, as does the XY Planning Network.
- Interview the planners on your list. Once you have a few names, call each planner and interview them, Brewer recommends. Ask about their qualifications, their approach, how much they charge and what is included in the price, she says.
In the end, how well you click with a planner is key. "It's really important to find a planner who's a good personality fit," Bera says.
- How to pay, send, receive money using Google Pay – Google has combined Google Wallet and Android Pay in one mobile wallet and P2P app: Google Pay. Here's everything you need to know about security, privacy, payment options and fees ...
- Kids learn best by practicing their money skills, study shows – If you’re trying to teach your kids about money, don’t just rely on word-of-mouth alone. A growing body of research suggests parents should do more than just talk with their kids and hope they’ll follow their advice ...
- Credit card offers no longer flooding your mailbox? Here's why – As issuers move to cheaper, smarter alternatives to direct mail, you still have options to get access to the best credit card offers ...