3 Reasons to Hire a Financial Advisor

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™


Ah, spring has sprung! The flowers and trees are budding, the birds are chirping and the loud, incessant drone of lawnmowers reverberates throughout the neighborhoods of Mansfield.

As a young teenager, I remember the great sense of satisfaction I experienced when my dad taught me how to cut the grass. I pulled the starter cord and got the lawnmower running all by myself. I pushed the mower in straight-lines in such a way that even Joe Mooney -- the long-time groundskeeper at Fenway -- would be proud. What joy and fun! That is, until dad asked me to cut the lawn the following week. Like most boys, I found cutting the lawn was fun the first time. But after that? Not so much. It became a terrible chore.

Today, I still cut my own grass. I have grown to like the activity. I enjoy being outside. I like walking around my yard. And I still get a sense of satisfaction when the job is done and the green carpet of grass looks nicely manicured. Some folks, however hate cutting the lawn and consequently hire someone to do it instead. Why? There are lots of good reasons:

• You’re too busy
• You don’t have the health, skills or tools
• You would prefer to spend your weekends doing something more fun


Interestingly, these are some of the very same reasons why people hire financial advisors. As a CERTIFIED FINANCIAL PLANNER™, I can confidently tell you that financial planning is not brain surgery or rocket science. In fact, I believe that most people are capable of managing their own money. The internet, TV and radio talk-shows offer no shortage of financial tools, calculators, research and education. But if you don’t have the time, interest or inclination to focus on your finances, you should seek professional help.

Here are three warning signs that it is time for you to hire a financial advisor:

1. Procrastination: You know you should fund your IRA, buy that additional life insurance, or open a 529 college plan, but you just never get around to it. Let’s face it, we all have too many other things to do, or at least that’s what we tell ourselves. If you know you should develop a retirement plan, but find yourself rearranging your sock drawer instead, it’s time to hire an advisor. Or, if your daughter is five and you’ve been telling yourself since the day she was born that you’ll open that college savings plan, it’s time. A good financial advisor will call you to make sure you don’t miss the IRA deadline, forget to send in your insurance paperwork, or fund your daughter’s college savings plan.

2. Disinterest: If the money section of your newspaper never gets read or if your eyes roll in the back of your head when the subject of the economy or finance comes up in conversation, then it’s probably time to get help. If you don’t know the difference between a Roth and a Traditional IRA, or if you think a 401k is a very long running race, it’s time. There is so much information floating around that if you’re really not interested in investments, insurance, taxation and the like, you’ll probably struggle educating yourself on these important matters. One of the great values of a financial advisor is having someone to tell you what you need to know.

3. Lack of Time: A famous Greek philosopher once said, “Time is the most valuable thing a man can spend”. (1)  Just like the golfer who prefers to hire a lawn company to cut his grass so he spend his time on the golf course each Saturday, some folks prefer to hire a financial advisor so that when they get home from work they can relax, spend time with their family and know that their finances aren’t being neglected. Many people know they could handle their own finances, but either can’t take the time, or don’t want to take the time to do so. If you’re struggling to balance work and family time and find that your financial and retirement goals are being ignored, it’s time to get help.


Don't Let Your Lawn (or Finances) Go to Seed

It’s one thing to let the lawn go and find it overgrown. It’s another thing all together to let your finances go and discover too late that your financial affairs have suffered as a result.



______________________________________________________________________
This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/three-reasons-to-hire-a-financial-advisor 



The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


(1) Theophrastus: “Father of Botany” and student of Aristotle.

Strapped for Cash?

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™   


At some point in our lives, most of us have felt a little strapped for cash. Perhaps we suffered a job loss or unexpected medical expense. But maybe we just overspent and are afraid to admit how much we really owe on credit cards. Or possibly, we’ve decided it’s high time to replace the ‘89 Ford Aerostar that has 200,000 miles and probably just as many Cheerios stuck between the kid’s seat cushions.

The days of using our homes as a piggy bank to bail us out are all but over. Before approving home equity loans, lenders today require better credit scores, more home equity and higher income than they have in the past. So where are Americans turning to finance college, upgrade their kitchens and get the debt collectors off their backs? Their retirement plans.

Last month a survey released by Bankrate 1 shows that nearly one-fifth of full-time workers have dipped into their retirement accounts to cover a financial emergency in the past 12 months. According to the survey, 19 percent of Americans have either borrowed or withdrawn funds from their retirement savings.

Robbing Your Retirement: Early Withdrawal from your IRA or 401k plan

When times are tough, making early withdrawals from your retirement funds can seem like a quick source of cash. It is. But it can be an extremely expensive source of quick cash and should really only be considered in cases of emergency. Remember, we’re talking about your retirement plan, not your Aruba vacation plan! So before you withdraw money from your retirement account consider the following traps:

Withdrawal Trap 1:Taxes and Penalties. Money inside your deductible IRA or 401k plan has never been taxed. Your contributions were made with pre-tax dollars and you’ve never had to pay taxes on interest, capital gains or dividends either. But, once you take money out of the plan, it will be time to pay the piper. When you withdraw money, you’ll pay taxes based on your current tax bracket – and the withdrawal might even cause you to jump into a higher bracket. If you’re younger than 59 ½ and take a distribution, you may be subject to an additional tax of 10%. Here’s an example highlighting the consequences of withdrawal.

Withdrawal Trap 2: Less Money for Future Growth. Obviously, when you withdraw a dollar, you have one less dollar available at retirement. But more than this, that dollar is no longer earning interest so your account won’t have the opportunity to grow as quickly because your portfolio (and consequently your earnings) will be smaller. You can never replace the missed earning opportunities.

A Better Option: Borrow using a 401k Loan

Sometimes when you’re really strapped for cash and must get money from somewhere, a loan from your 401k plan can be a good idea because it’s a convenient and low-cost source for cash. In general, you can borrow one-half of your plan balance up to $50,000. You’ll have up to 5-years to pay it back and the interest you pay doesn’t go to a bank, but back into your own account. If you do take a loan from your 401k, don’t borrow more than you absolutely need, and be sure to repay the loan as quickly as possible because when you pay the money back over a short period of time, is usually has little impact on your saving progress.

401k Loan Trap: Risk of Termination. Know that if you leave your employer, most plans will require you to pay-off the loan within 60 days. And if you’re unable to do so, the entire outstanding balance will be seen as a withdrawal and you’ll be taxed and penalized, accordingly.


The Best Option: Create an Emergency Fund

Most experts agree that you should keep between three and six months worth of your living expenses set aside in an emergency fund. Not only will this help should you experience a sudden loss of income, but it will also ease the burden of smaller emergencies such as repairing the brakes on your car. If you currently don’t have one, make it a priority. Open a savings account at your bank and set up automatic deposits where you contribute an affordable amount each month. While this approach won’t help you if you’re strapped for cash now, it will give you peace of mind and provide a financial safety net for the future.


_________________________________________________________________________
This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/strapped-for-cash

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


1 www.bankrate.com/finance/consumer-index/april-2011-retirement-savings


2 This example assumes all contributions to the account were tax deductible and contributions and earnings grew tax deferred. This example is for illustrative purposes only.

Guest Post: Subtle Signs and Signals

By Sara-Lynn Reynolds

During my kids' hectic teenage years, I often lost sight of my parents' "aging needs."

I wish I had been more available, more observant, more everything, but it just wasn’t possible, since they lived a fair distance from me. Beating yourself up over a lack of parental oversight isn’t productive, so I would like to share some aging signs and tips that might be of help.
Some of these signals may be noticeable to you, though if your parents do not live close, it might be important to contact a friend or two of theirs so that you stay abreast of a possible problem before a crises ensues. Being aware of any changes in the way your parents handle day-to-day chores can provide health clues.

Do you speak to your parents often and actually... (Read the rest of the article here)




_________________________________________________________________________

This article was written by Sara-Lynn Reynolds. Sara-Lynn is the Community and Education Liason for Home Instead Senior Care in Attleboro, MA.  For more ideas on starting this type of conversation with your folks, check out this video.
Sara-Lynn is not endorsed by or affiliated with LPL Financial.