Talking about personal finances–or even money in general–is often seen as tactless or inappropriate yet it is so important! Money dictates where we live, when we can retire and the opportunities we can afford. While money doesn't equal happiness, not stressing about paying your next rent check sure does.
Born & raised in San Diego county, I have seen the immense changes to my hometown, one of those changes is the cost of living. As average house prices are a casual $1million, I knew I needed to gain some financial literacy STAT.
There is a lot of pre-work to be done in finding the right financial planner as you are entrusting that person with not only your life savings but allowing them to guide your financial moves for potentially the next 30+ years. This is a whole blog topic in itself... but we're going to move straight ahead to the pros & cons.
Gaining financial literacy
My financial planner sat down with me to understand my financial literacy (basically none) and we went through the basics. She starts every conversation with the reminder to stop her if she uses any term that I could use clarification on. When it came time to talk about taxes she provided diagrams with visual explanations as well as hard number examples.
Understanding where you're at today
We took a look at the investments and savings I currently have and she continued the projections if I was to contribute the same rate to my 401K, savings etc. for the next five years and let me know how 'on track' I was based on my personal timeline. I wasn't on track to meet my goal 100%, so she showed me how I could be investing / saving the money I already have to work with and reach my goals in the same time frame. Having the numbers presented in a tangible way and having a professional there to answer questions let me have a more realistic understanding of not only where I am, but where I want to go.
Setting realistic goals & timelines
Even on our introductory call my financial planner asked about my personal goals; did I want a new car? Am I saving for a house, wedding or other large life expense? When did I see these expenses coming up? As a 22 year old, thinking about buying a house or getting married feels so far away... but looking at my ideal timeline made the expenses real. Wanting to own a home in San Diego before 30 suddenly felt both more possible and impossible at the same time. Having these conversations and putting my goals on paper was incredibly eye-opening as I moved on to take a hard look at how I was budgeting (or rather not budgeting).
Making your dreams come true and evaluating how you spend your money
I filled out a break down of my yearly expenses: from monthly rent to travel, to medical and dining out costs. This showed me where I was putting my money and encouraged me to shift money around to increase my travel budget. The breakdown also showed me my 'surplus' each year that I could put toward long term goals like retirement and a down payment on a house. There's no pressure to commit 100% of surplus to savings and I was encouraged to give myself more spending money 'just in case' so I could have fun. Finding a financial planner who takes the time to know you as a person, as well as where you are in life ensures they are giving the best advice for you.... not for client 372.
Financial Planning is affordable
If you're struggling to pay for your financial planner, you're not at the right place. My financial planner was able to price out what I needed to a very reasonable cost- one I did not have to think twice about paying (yes, it costs less than my contacts each year).