Just like any scenario, the sense of accomplishment you get when you figured something out yourself and reached your goals is a great feeling.
When it comes to your money, that sense of accomplishment is even greater.
However, there’s less room for trial and error with your money than in other areas of life.
It’s a lot easier to test different diets and workout plans to see what works than it is to test different ways to manage your money and figure out the best paths to take.
A financial advisor can bring a lot of value to a situation, but it may also be worth it to do it yourself - let’s dive into the pros and cons of each option.
Doing It Yourself
One of the first questions you should ask yourself if you’re going to take the DIY route is:
"Why haven’t I done it yet?"
How many times have you set New Year's Resolutions only to have them pushed to the back burner by March?
I'm guilty of this myself...
This leads me into one of the biggest cons of DIY: the accountability factor.
When you decide to manage money yourself, it takes a lot of responsibility and commitment to stick with it.
Working with a financial advisor ensures that you follow through with the plan and helps you stay on the right path to reach your goals, whatever they may be.
Another factor to consider when going DIY is the time commitment.
If you’re a young professional or a working parent, you probably want to enjoy your free time with your family or friends - not spending countless hours trying to research and understand all your options and then figuring out how to execute on them.
On the flip side, a pro of doing it yourself is the ability to save money on fees.
All advisors are different and some may have fees that can eat away at your investment returns and ultimately reduce the value of using an advisor. It’s important to take some time to ask questions and understand how your potential advisor is getting paid before jumping into a relationship.
ALSO READ: Is An Advisor Worth It?
Using a Financial Advisor
A common misconception is that a financial advisor only helps you choose investments. This is an area of personal finance that in my opinion, is the easiest part to do yourself.
However, understanding that there are larger, more impactful decisions to be made regarding your money is key to understanding the benefits of a financial advisor.
You may have already started investing yourself - but have you also considered the tax implications of one investment over another, the risk of certain investments, and how these investments impact your long term success?
Aside from investments, when you take the DIY approach there’s many other areas of personal finance that you need to understand and be aware of. Some of these areas are:
Having the correct amount of and not overpaying for insurance
Establishing a retirement plan
Saving money on taxes
Managing your risk
Understanding your cash flow
Maybe you’ve done a great job saving and investing, but if you weren’t aware of the tax implications of one investment over another - you may be hit with a large tax bill that you weren’t prepared for.
A financial advisor acts as a safety net when making decisions. They help you understand the impact one decision has over another and ultimately help you make the best decisions for your situation.
The Bottom Line
Whether you decide to handle your finances on your own or use a financial advisor, two important things to keep in mind are trust and confidence.
When doing it yourself, you need the confidence to make the right decisions and trust yourself that you're making the right decisions.
When working with an advisor, you need to trust that this person is making the right decisions for your situation and you need to be confident that they'll get you where you want to be.
Choosing between DIY and an advisor isn't an easy decision and it's important to remember that meeting with an advisor doesn't mean you have to work with them.
You can meet with an advisor to get a better understanding of what they do and how they can help, but if it doesn't make sense for you - you may ultimately decide to do it yourself and that's okay.
There's no one right way to approach personal finance.
There's only what's right for you and your situation.
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