A financial advisor is a finance professional who consults people regarding their finances. Many components come under this, like insurance, investments, emergency funds, etc. Whenever you get a house renovated, you hire an interior designer similarly; whenever you are making any money-related decision that you are not entirely sure of, it is highly advisable to consult a financial advisor. It is essential to understand that no matter how much money you earn, you will not have a financially secure life unless you manage it well.
There are many stories of millionaires who went broke and low salaried employees who built a fortune. The only difference being in the way they manage the money they earn. Warren Buffett said it better - "If you are not making money while you are sleeping, you will be working for the rest of your life."
Here are a few things that you can talk to your financial advisor about:
- How much you should save each month?
- How you should budget your day to day spendings?
- Where and how much money should you invest?
- What tax-saving measures you can take for maximum benefits?
- Your financial goals?
- A financial plan for you or your kids?
- Your insurance policies?
- Whether you should buy a car on loan or pay for it in full?
- Anything that involves earning, saving, or spending money?
What to Expect?
Assessing the Current Scenario
The first thing that any financial advisor would have to do before giving you any advice is to understand your current situation and goals. They will need to know many details like how much you have in savings, your income, where you invested your money, etc.
Once they know your financial scenario, the next step would be to understand you and your goals. This would include things like how many people are there in the family, what kind of lifestyle you imagine for yourself, how you plan to increase your income, when you plan to buy a house, etc.
It is best to share as much detail as possible with your financial advisor since every decision is interconnected and must be considered. Try to manage your finances as clearly as possible.
Keep all documents and plans organized, have complete clarity about where your money is parked, and keep revisiting it from time to time. Build a diversified portfolio and reshuffle it as and when required.
Also Read: Making Personal Finance Decisions
Paving a Path Forward
Once you have discussed your current financial situation and have gained clarity on your financial goals, it is now time to achieve those goals. For that, you will need a financial plan.
Different financial planners could have other formats for their financial plan, but almost all will cover the following components. It will include the necessary insurances that you must have. These will depend on your situation like age, family members, job type, etc. It will also cover an emergency fund.
They will share how much you should keep in your emergency fund and where you should park the money you choose to save separately for your emergency fund. It will include your investment plan. This section of the financial plan is essential, which will take care of most of your financial goals.
Here you will decide which assets you wish to invest your money in, like gold, stocks, real estate, mutual funds, etc. You will have to choose how to diversify your portfolio, how much risk you are willing to take, the time horizon you plan to invest for, etc.
The financial plan could also include some tips and tricks that you could follow in your day-to-day habits that might help you better manage your daily expenses.
These are some of the things financial advisors do, and you can expect from them. There is no clear rule, though, and you should always feel free to ask whatever doubts you may have. Make sure you and your financial advisor have complete clarity of your current financial situation and your future goals for best results.
(Check out 'Learn & Grow with Wizely' 'to read and learn all about personal finance and financial planning.)