Working out a Debt Repayment Plan
Do I Need a Financial Planner?
Before wondering if you need a financial planner, you should know what one is. A financial planner is not a stock broker or an insurance salesman, though they may do these jobs. A financial planner is concerned with his client’s finances, with regards to the client’s wishes. Simply put, a financial planner helps you manage your money and debt, to include things like your retirement, life insurance, savings, credit and education expenses (paying for college, mostly).
The financial system in America (and other places) is often extremely complex and fraught with tough decisions. A financial planner has been trained to make good decisions based on his knowledge of financial markets, money and the various options available to you as a worker, whether it is cash flow or retirement
How to Pick a Financial Planner
Picking a financial planner is like picking any other provider of professional services – you have to do your homework! When you need a plumber, do you just pick a name out of the phone book, or do you ask your friends and family for recommendations? Or how about a doctor? Do you just walk into an office and say ‘Sign me up!’? Of course not. You look around, do your research, ask your family and friends, and eventually come to an informed decision. Picking a financial planner is exactly the same. It is not a decision to be made lightly.
The most important thing about picking a financial planner is making sure they are certified. A Certified Financial Planner (CFP) has been awarded a certificate from the Certified Financial Planner Board of the United States. CFPs have passed a rigorous test and multiple screenings, class examinations and career reviews in order to make sure they are truly qualified to handle other peoples’ money. You should not engage the services of a financial planner unless they are certified!
Now that you know what to look for, you have several options. There are large firms that employ dozens of CFPs. Places like TD Waterhouse and Charles Schwab offer financial planning services to anyone who wants them. The important thing to remember is that financial planning is not just for the ridiculously wealthy. Everyone with a retirement account should have some basic contact with a CFP every once in a while, just to make sure everything is on track. Going with a large company has its advantages. They often have more resources, and they frequently hire the best. You can be sure that when you are seeing a CFP working for a large company, he or she has already been scrutinized by several levels of management.
On the other hand, there are plenty of independent CFPs out there. An independent CFP might offer a more personal touch, might have more time for you, and may not be dealing with as many clients. On the other hand, he or she might have fewer resources at their disposal.
Questions to Ask a Financial Planner
The CFPB maintains a website with a checklist of questions you should ask a potential CFP. They are not all posted here, but some of the most important are:
- What are your qualifications?
- Have you ever been disciplined for unethical conduct?
- How will you be paid?
- How will you plan my finances?
- Can I have it all in writing?
There are many other questions you may want to ask your CFP, but the most important ones deal with making sure you are comfortable with putting your money in their hands. The certification process exists for a reason, so use it! Asking these questions will give you a better sense of what your CFP will do once you hire him or her.
Debt repayment and consolidation is a very complicated business in this day and age. What is debt consolidation? Well, let’s say you have four credit cards and a car loan. Because you didn’t have such good credit, your four credit cards have a high interest rate, and you’re really feeling the pinch. You can consolidate your debts to throw all your payments into one lump sum, theoretically lowering your interest rate while doing so. How does this work? Generally a third party debt consolidation service will pay off all your debts with one lump sum, and so you end up paying them instead of four separate companies. Since you can “bargain” with the debt consolidation service, their interest rate is almost certain to be lower, so you have a good chance of saving money, not to mention you’re now only making one payment instead of four or five.
If you have a financial planner, they can help you pick the best debt consolidation option. As always, there are some unscrupulous companies out there willing to take advantage of your situation. In this case, make sure you have a conversation with your CFP before making any decisions. It may be that your CFP can suggest some strategies to you that you’ve never thought of.
Picking a financial planner is like picking any other service. You have to do your homework, ask a lot of questions, and always be willing to question decisions that have been made. It is your money; don’t let someone else lose it!