Seeking guidance from a qualified advisor can help bring you closer to meeting your financial goals. But when it comes to financial advisors, most Americans tend to make one major mistake, and it's not choosing the wrong professional or paying more fees than necessary. Rather, it's not getting help early enough.
According to a 2016 TIAA study, among Americans who use financial advisors, 77% feel they should've started seeking outside help earlier in their careers. Meanwhile, 59% of Americans feel that to offer the maximum benefit, an initial meeting with a financial advisor should occur before the age of 35. If you've been putting off that first talk with a financial professional, you should know that the sooner you get started, the more of an opportunity your advisor will have to help you map out your future.
What are we waiting for?
Why do so many Americans hold off on meeting with an advisor? According to TIAA, 35% of people who postpone that crucial first meeting do so because they think they don't have enough money to invest. In fact, almost half of Americans assume they need more than $50,000 in savings to justify calling an advisor in the first place.
However, while some elite advisors might impose an investment minimum, many are willing to meet with clients regardless of how much they have in assets -- and that's something younger savers in particular ought to know. Furthermore, many Americans don't feel the need to meet with an advisor until they reach a specific milestone, like retirement, buying a home, or having a child. While these events might be natural triggers, they're by no means prerequisites to enlisting outside help. Though advisors do tend to focus on long-term goals, many are also available to help with near-term financial matters, like budgeting, building emergency funds, or navigating insurance-related decisions.
What can your advisor do for you?
Let's talk about budgeting for a second, because almost 60% of Americans don't do it, and that's a problem. Following a budget is one of the easiest ways to keep track of your finances and identify opportunities to save money, whether it's for short-term goals like buying a house or long-term goals like retirement. And while you don't need a financial advisor to draw up a budget (you can create one online, or use a basic spreadsheet), some of us need that added push to get started.
Emergency savings, or the lack thereof, are another area where Americans tend to fall short. A recent GoBankingRates survey found that 69% of the U.S. population has less than $1,000 in savings, while 34% of Americans have no savings at all. Now, you don't need an expert to tell you that having little to no money in the bank is a bad thing. But what a financial advisor can do is help you reconcile your income and expenses to find ways to save.
Finally, there's insurance to think about. According to a 2015 Bankrate report, only 60% of Americans actually have life insurance, but of those, nearly half may be underinsured. Specifically, 47% of those with a plan have $100,000 or less in coverage, while 21% have less than $25,000 in coverage. Families with children under the age of 18 are particularly lacking in this area. A good 37% have no life insurance at all, while 32% have coverage of $100,000 or less. And since life insurance is one of those things that tends to get increasingly expensive over time, having a financial advisor suggest it when you're younger could help you lock in a more favorable rate -- for life.
Of course, these are just some of the things a financial advisor can help you with. Just as importantly, if you are a good saver, an advisor can develop an investment strategy to help you meet your retirement savings goals.
Imagine you typically save $300 a month but don't really know how to invest that money. If you limit yourself to conservative investments that yield just a 2% average annual return, over the course of 30 years, you'll have $146,000 to show for. But if an advisor helps you achieve an average annual 8% return, in 30 years, you'll be looking at $408,000 instead. The sooner you start investing, the more opportunity you'll have to take advantage of compounding -- which is why it pays to start using an advisor early on in your career, when you have four decades (or more) to accumulate wealth.
No matter how old you are or how much money you have, it's never too early to make an appointment with a financial professional. And if you find the right advisor, it could mean the difference between achieving your money-related goals or falling short time and time again.
The Motley Fool has a disclosure policy.