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Should You DIY Your Financial Planning?

DIY FailMany individuals may consider doing their own financial planning over the course of their lives. Although financial planning is generally not too terribly difficult, to answer the title’s question, the answer should be “No.”

Here are some reasons why.

  1. Get a second opinion. Even if you do it yourself, it’s wise to have another professional take a look at what you’re doing. A good financial professional will confirm good decisions you’ve made and will politely tell you if there’s a gap in your plan or if you may be making mistakes or omissions here and there. Even good financial professionals have another professional look at their plans. Be wise enough to realize you don’t know everything.
  1. Time management. Although many individuals are smart enough to learn how to do their own financial plans, many aren’t willing to take the appropriate amount of time. It takes quite a bit of time to learn a skill or trade. Financial planning is no different. Although some financial planners’ recommendations may come easily, they took years to learn. And they are still learning – as any professional should.
  1. Leverage. Think of it this way. Many individuals are qualified to study and learn how to become doctors and attorneys.  However, many of us do not have the time to learn these professional skills. What we do however, is leverage these professionals’ knowledge in exchange for a payment. It is much more cost and time effective in most cases to pay a small sum out of pocket in exchange for valuable information or recommendations in return.
  1. Behavioral accountability. Although we would be the first to agree that an index investment strategy is not rocket surgery, a financial professional can add value in helping control investors’ emotions. This includes recommending an investor not sell at a market bottom nor make devastating financial decisions trying to beat the market. Additionally, in times of stress such as divorce or death a financial professional can provide an ear and a calm voice of reason to help an investor through difficult times.
  1. Work with a fiduciary. When seeking a financial professional it is imperative to work with a fiduciary. An individual doing it on their own is thus their own fiduciary. The question is, is the investor going to act in their own best interest? Many individuals would say yes however, this can be difficult to do during times of market volatility and stressful situations. Working with a fiduciary can help provide objective, fiduciary advice to help an individual stay true to their financial plan and goals.

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