That’s a good question. If you look at the top financial advisors they charge hefty fees and also only take as clients who are high net worth individuals usually above $1M. However, everyone needs basic planning.
Young graduates who just started making money, but carry college loans, newly weds who have extra expenses to deal with, those that have credit card debt need advice and planning but can’t afford to find it.
It also starts with education and understanding of money management. Also a really good knowledge of risk vs reward dynamics will help avoid pitfalls in investing.
Basic planning involves understanding money flow. Cash you earn is positive cash flow. Cash you spend is negative cash flow. Usually positive cash flow is what you make in your job. If you have investments like stock, fixed deposits, or bonds the interest or dividend they generate year over year also adds to the cash flow.
Most problems arise because we spend more than we earn. This may seem like a simple problem but in reality it’s more complex. What you take home from your pay check is usually much less than what you are paid. This is because of income tax, pay roll deductions etc. Also if you have credit card debt, car loan or mortgage on the house, all of these need to be considered before you figure out what your take home pay is.
Life is pretty good at throwing curve balls at us. Your car may unexpectedly give up on you and needs attention. In my case, I experienced sudden expense only last week. My son lost his glasses and we had to rush to the eye doctor to get a new pair of glasses. The whole thing with deductibles etc. cost me $250. Something a good plan should expect to have happen from time to time.
Also you work hard for the money and you deserve to have fun. So if you are planning on that vacation to Hawaii or want to take your kids to Disney World, you need to save up for that trip. How much do you expect to spend and when?
If you plan ahead for regular expenses as well as irregular ones, you will realize that it’s easy to get out of debt and/or stay debt free.
If you can afford a financial advisor that’s great for you. If not, use a tool like Mofinto that walks you through your goals, expenses, income, investments etc. Mofinto automatically calculates the taxes etc. so that you have a good idea of your cash flow for several years to come. It will also predict how much of a chance you have of making your goals.
Using a tool like Mofinto, makes you realize planning is not a chore but rather interesting. You can try different scenarios to see which plan works best.
Best of all you can’t beat the price. It’s totally free. Sign up and give it a try.
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