Advice Costs You, and Saves You
Then you're feeling financially out of control, wanting help is natural.
Affording it probably isn't.
Plenty of financial planners offer good financial advice - for $100 to $150 an hour.
But if the price is often high, so are the rewards: These professionals help you handle everything from basic budgeting to advanced retirement planning, says Eric Tyson, a planner and financial writer based in San Francisco.
"If you're really uncertain, you don't know about investing, hiring a financial planner makes sense," says Charles Jaffe, author of a new book, "The Right Way to Hire Financial Help."
Three things that drive people to planners, he says, are:
Age. As baby boomers near retirement, they are rushing to get investments working harder.
Experience. Usually a bad experience trying to manage one's own finances.
Money. Too much of it or not enough.
If talking with an adviser "pushes you to action, that's a good reason to hire somebody," Mr. Tyson says.
That's what Fatima and John Penrose found when they hired an accountant this year to help sort out their finances.
"Before, when I called up our account, I didn't know whether to expect a $5,000 balance or a $5,000 overdraft" on a checking credit line, Mr. Penrose says.
The couple learned that, even with professional help, a hands-on approach pays off. After a month of spending Saturdays and late nights recording a year's worth of expenses on their computer, using Quicken financial software, the Penroses feel more in control. They hope to free up $5,000 to $10,000 a year to put toward their 2-year-old daughter's education and other family needs.
But more important, Mrs. Penrose says, is that now they feel good about their money. "We have healthy conversations about finances. When we have a big expenditure we can say, 'OK, here's where the money's going to come from.' And at the end of the year, we can look back and say we saved something."
At the same time, hiring a financial planner is no magic bullet.
"You should learn how to do as much as possible yourself," Tyson says, so you'll have some idea what you're paying the planner for.
That can mean using budgeting software, reading books, or plugging your numbers into retirement worksheets provided free by many mutual-fund companies.
For many people, such generic advice is enough. Others need more help.
Asking whether you should hire a financial planner, Mr. Jaffe says, is like asking whether you should hire a plumber about a leak or a mechanic to fix your car.
You can do the work yourself as long as you're sure you can do it right. But if your toilet is leaking and you don't fix it right the first time, the leak could rot the floor and flood the basement. In other words, your repairs could get harder and more expensive.
The difference between hiring a plumber and hiring a financial adviser is the stigma often attached to hiring someone else to look at your money.
Then there are the costs, which tend to rise depending on how many accounts you have.
"It is hard for people who spend $200 on a tax return to think about spending $1,000 on financial advice," says Karl Baumann, a certified public accountant in Wellesley, Mass.
But many people need help, he says. The most common problem is budgeting. Many clients "start off saying they need help picking a mutual fund. That should be the last question," Mr. Baumann says. "Are they saving any money?"
Many people think they are, but they aren't if they also live on credit.
If you can't afford an hourly financial planner, cheaper options abound.
Two nonprofit credit-counseling services offer budgeting help for minimal fees: Debt Counselors of America (800-680-3328) and Consumer Credit Counseling Service (800-388-2227).
Most Enrolled Agent tax preparers can help with budgeting, Tyson says.
Useful books include Tyson's "Personal Finance for Dummies" (IDG Books) and Jane Bryant Quinn's "Making the Most of Your Money" (Simon & Schuster).
Some mutual-fund companies offer help. Dreyfus's discount-brokerage offers the Lion Account (800-843-5466; $10,000 minimum) that includes phone access to planners for $100 a year (free for accounts of $50,000).
For many people, though, finding the right planner means face-to-face interviews to determine compatibility.
In any case, the most important reason to seek advice is your own comfort level and peace of mind.
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Alphabet soup deciphered
* CPA (certified public accountant): Must pass the Uniform CPA Exam; meet state rules on experience and licensing; ongoing education.
* CFA (chartered financial analyst): Must have several years work experience; course work; exams in securities analysis, portfolio management, financial accounting, economics, and ethics.
* CFP (certified financial planner): Must have minimum three years experience; course work; two-day exam covering 100 financial topics; 30 hours of continuing education every two years.
* ChFC (chartered financial consultant): Requires extensive training; 30 hours of continuing education every two years.
* PFS (personal financial specialist) Practice must concentrate on financial planning issues; rigorous educational requirements; must complete 72 hours of course work every three years.
* RIA (registered investment adviser): Requires registration with the appropriate state or national agency; no education, exam, or work experience required.
Source: "The Right Way to Hire Financial Help"