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How to Get the Benefits of a Free Financial Advisor

Money affects basically every aspect of our lives. However, learning to properly manage your money isn’t always easy to do. So how can you learn about personal finance while also getting advice that applies to your specific financial situation? One strategy is to work with a financial advisor. A financial advisor can help you create and execute a financial plan no matter where you are in your life.  This can get expensive though. Luckily, if you can’t afford a financial advisor, there are free tools, calculators and software that can act almost like having a free financial advisor.

Should You Consider a Financial Advisor?

First of all, a financial advisor is a professional who advises clients on how to best manage their finances. That could include general financial planning or advice on a very specific tax loophole. Regardless of your situation, working with a financial advisor can help you to achieve your personal financial goals.

The cost of a financial advisor will depend on what kind of advisor you work with and which services you use. For example, you may pay a one-time consultation fee if you need help creating a financial plan, but then you plan to handle your finances on your own.

More commonly, people work with a financial advisor to create and manage an investment portfolio. In this case, you would most likely pay the advisor a percentage fee based on the assets in your portfolio. The management fee for a traditional financial advisor is usually between 1% and 2%, but it could easily go higher. (Just as an example, if you have $100,000 in assets under management and your advisor charges you a fee of 2%, you would pay a fee of $2,000.)

Recent years have seen the rise of robo-advisors. Unlike a traditional advisor, a robo-advisor is completely online. You create an account, move money into the account and then the robo-advisor handles everything else digitally. There are usually very few or no human financial advisors on staff and that allows robo-advisors to charge lower fees. Most robo-advisors have management fees of 0.50% or less.

Free Financial Planning Software: Personal Capital

How to Get the Benefits of a Free Financial Advisor

If you want help with financial planning but you don’t want to pay, consider a free account with Personal Capital. Personal Capital is a robo-advisor that serves two distinct sets of clients: people with millions of dollars to invest and DIY investors who want access to free financial tools.

With a paid account, Personal Capital will manage your investments for a fee of 0.89% on the first $1 million, down to a fee of 0.49% if you invest over $10 million. Those are high fees by robo-advisor standards and favor people with millions of dollars to invest.

However, creating an account with Personal Capital is free and it gives you access to a host of free financial planning software. That software includes tools to calculate your net worth, manage your cash flow and analyze your spending.

If you have investment accounts (even if you don’t invest through Personal Capital) you can link them all and monitor them through the Personal Capital Dashboard. You cannot buy or sell securities through your linked accounts, but you can see what’s performing well, what isn’t doing so well and how your investments project for the future.

Naturally, a free account will not give you access to all of Personal Capital’s financial planning software. You will get more if you use a paid plan. However, the free software is robust and will be enough for the average DIY investor to monitor and plan their personal finances.

Free Retirement and Tax Calculators

Another free way to manage your finances is through the use of online tools and calculators. The advantage to using these is that you can find tools and calculators to answer more specific financial questions. Something like the Personal Capital software will help you track what your doing and get projections. But a calculator can help you create a goal to start with.

For example, let’s say your employer offers a 401(k). You want to know if it will really make a difference to contribute an extra 1% of your salary in order to maximize your employer match (hint: yes, it will help). To start, you might want to use a free retirement calculator to create a retirement savings goal. Once you do that, you know exactly how much you need to save. Then you can go to a 401(k) calculator to see how making different annual or monthly contributions will affect your savings totals.

Another area that calculators can help you is with taxes. Consider property taxes. It’s great to have property taxes factored into your budget, but how do you know what your property taxes will be? Calculating assessed value and millage rates isn’t always easy. It also varies from state to state and even from town to town. It’s much simpler if you can just enter some personal info into a property tax calculator and get an immediate answer for how much you will be spending.

Budget Planning

How to Get the Benefits of a Free Financial Advisor

A budget is a great tool to keep you on track financially. The challenge is that your budget is highly personalized. Your bills are probably quite different from even a spouse or roommate. Bills also change from month to month. So as you think about how to budget, you could look to someone like budget expert J. Money. Not only can he give you tips on how to create a budget, he can also show you free budget templates on his Budgets Are Sexy blog.

You should also look through your bank’s and your credit card issuer’s websites. They may offer free budgeting software that you can link directly to your accounts.

The Bottom Line

Working with a financial advisor is a great way to set yourself up for financial success. However, you can also manage your money for free using a combination of free financial planning software and tools. The robo-advisor Personal Capital offers some great financial planning software that allows you to link your financial accounts and see everything in one place. Free online calculators, like what SmartAsset offers, can help you to answer specific questions about what your financial goals should be. The disadvantage to using multiple tools (instead of paying a financial advisor) is that you will have to use a couple of different sites and sources. However, you  could also save yourself thousands of dollars over your lifetime.

Tips for Handling Your Own Finances

  • One great way to save more money is simply by using a high-interest savings account. The truth is that the interest rate for an average savings account is very low. That means you won’t actually earn much from interest. By using an account with a high interest rate, you make your money work for you. You probably won’t earn nearly as much as you would through investing, but a high-yield account can certainly earn you more than the average savings account would.
  • As you think about making a budget, remember to personalize it to your finances. Think about all your expenses, whether you make them weekly, monthly or annually. Consider all of your debts and their payment schedules. Don’t forget to list all your sources of income. That could mean a regular salary in addition to the $25 you make every month from the community bake sale.
  • One tool that may help you track your financial progress is net worth. Calculating your net worth will give you a snapshot of your overall financial picture. Your net worth may not be very high to start, you should try to steadily increase it over time by paying down your debts and saving more. Ultimately, you just want your net worth moving in the right direction (i.e. getting higher). It can also be very encouraging to look back at the end of a hard year and see that you were able to push your net worth higher, even if just by $100!
  • If you decide that you need more assistance, you may want to pay for the services of a financial advisor. A matching tool like SmartAsset’s SmartAdvisor can help you find someone who is a fiduciary. This program starts with 3,000 financial advisors but based on answers relating to your financial situation and goals, it narrows that down to up to three financial advisors who meet your needs. You can then read their profiles, meet with them on the phone or in person and pick the person you want to work with on your finances.

Photo credit: ©iStock.com/Georgijevic, ©iStock.com/UberImages, ©iStock.com/izusek

Derek Silva, CEPF® Derek Silva is determined to make personal finance accessible to everyone. He writes on a variety of personal finance topics for SmartAsset, serving as a retirement and credit card expert. Derek is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance® (CEPF®). He has a degree from the University of Massachusetts Amherst and has spent time as an English language teacher in the Portuguese autonomous region of the Azores. The message Derek hopes people take away from his writing is, “Don’t forget that money is just a tool to help you reach your goals and live the lifestyle you want.”
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