Financial planning is a crucial aspect of life, irrespective of one’s age or economic status. It necessitates making educated decisions about your finances to effectively pursue your life ambitions. For many, this process might seem quite difficult to figure out. This is where the role of financial advisors can become significant. They offer advice and guidance on assorted financial issues, including budgeting, investing, retirement planning, tax planning and insurance. Financial advisors provide a comprehensive perspective of your financial situation and assist you in making informed decisions to attain your financial objectives.
Why You Should Get a Financial Advisor in Your 20s
While not often considered by young adults, financial planning’s importance for those in their 20s can’t be overstated. This phase usually brings a set of financial hurdles like dealing with student loan debt, landing a first job or planning for significant life milestones such as buying a home or starting a family. A financial advisor can help maneuver through these challenges, establishing a robust financial base for your life.
According to one study, the majority of millennials confess they endure at least some financial strain. A financial advisor can clarify various financial concepts, such as the power of compound interest and offer tailored strategies to maximize its benefits. This can be the difference between someone living a comfortable life for decades and having plenty in their retirement fund compared to someone who isn’t sure how they’ll make it when they are done working.
What a Financial Advisor Can Help You With
It may be hard to justify the cost of a financial advisor in your 20s, especially if you don’t think you have enough assets accumulated yet. However, if you have a decent amount of money (~$50,000+) then it could be well worth the cost. Here are four specific things a financial advisor can help you with.
1. Creating a Long-Term Financial Plan
One mistake a lot of people make in their 20s is not having a long-term financial plan and not knowing what they are saving or investing for. It can take executing a financial plan for decades before you have enough money to retire. More and more young people are wanting to retire early, but it’s nearly impossible to do if you don’t plan for it well in advance.
2. Helping You Invest
You may know that you need to start investing, especially to accumulate enough money to save for the retirement you want. An expert can help match your goals, appetite for risk and make sure your portfolio is properly diversified. Plus, there are likely many assets that could help you achieve your goals that you may not be familiar with. Advisors can help you understand each and help you invest in the most appropriate ones.
3. Launching Your Retirement Saving
The earlier you can start saving for retirement, the more options you’ll have to retire early and the more money you’ll have to enjoy your golden years. The benefit of compound interest is that your account can continually grow over time. The more time you have, the more it can potentially grow. Getting retirement savings started in your 20s can make a huge difference in your future.
4. Helping You Create Strong Financial Habits
One of the biggest issues people have in reaching their long-term financial goals is creating the right financial habits when they are young. It’s okay to need help to find the right balance of financial habits that will help you reach the financial future you want. Strong habits can be the difference in hitting the milestones that are necessary for you to reach your long-term goals. You can have more money to pay off debt, buy a home or even retire when you want to.
Can a Financial Advisor Help You Eliminate Unnecessary Debt?
Many people in their 20s are grappling with substantial debt, particularly student loans and credit card loans. The Federal Reserve reports that the average American has $32,000+ in student debt and $7,279 in credit card debt. These figures often lead to financial strain and the habits that create these debts are crafted while you’re in your 20s.
While financial advisors aren’t the only solution for eliminating debt, their expertise can make certain strategies more accessible. They can formulate strategies for managing this debt, assist in creating a budget, comprehend interest rates and prioritize payments.
Financial planning is not a one-size-fits-all journey. Your financial needs and resources should be at the forefront when evaluating whether a financial advisor suits you. Identify your financial goals and evaluate the kind of help you need. Explore different types of advisors and their fees to make an informed decision. Finding the right advisor for you will depend on your financial situation, your financial goals and the value you attach to the advice.
Tips for Financial Planning
- It’s important to create a financial plan as early as possible. The best way to do that when you’re inexperienced is to find a financial advisor who can help. They can provide you with expertise and oversight to help you reach your short- and long-term financial goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You can also get insight into what your portfolio might look like with certain investments by using SmartAsset’s free investment calculator.
Photo credit: ©iStock.com/Pekic, ©iStock.com/fizkes, ©iStock.com/fizkes