3 Reasons I'd Never Work With a Financial Advisor to Manage My Money

There are many financial advisors out there that will help with different aspects of your financial life. I would never work with one.

While I appreciate getting professional advice in some situations, there are three big reasons why I am simply unwilling to pay a financial advisor for any advice.

1. I don't want to pay fees

I am very adverse to paying fees for money management advice. That's because I've seen the damage that fees can do to a brokerage account balance.

When you're talking about a long time horizon, even a small fee can make an outsized impact. For example, say you invested $20,000 and earned a 10% average annual return over 20 years. With a 2.5% fee, your returns would total $84,957 but with a 1.5% fee, you'd end up with $102,238 in returns.

I do not want to end up missing out on a ton of money that I could have saved, invested, or done other things with it because of the fees I had to pay an advisor. And this is true regardless of how the advisor assesses their fees (some advisors ask clients to pay a flat fee and others take a percentage of money being managed).

Frankly, I don't want to pay any money for financial advice, though, because I feel like the entire purpose of learning to be better at managing money is to have more of it -- and paying someone else to do it for you leaves you with less in the end.

2. I don't think managing money is that complicated

There's another really important reason why I don't feel like paying a financial advisor makes sense for me. In my opinion, managing money really is not that complicated. In fact, you can be successful at it if you do a few very simple things:

• Spend less than you earn (by making a budget)
• Avoid high-interest debt (like credit card debt)
• Keep your fixed expenses (including housing) below 50% of your household income
• Invest in simple, proven investments like an S&P 500 fund.

There is pretty much nothing a financial advisor is going to tell me beyond these steps that's going to help me end up with more in my checking account.

I don't want or need a professional to tell me how to cut my spending because I know what I most and least value so I can decide for myself where to splurge and where to save. There's also no reason to get professional help deciding how much to invest, since there are simple calculators online that can help me figure that out.

And, as for investing advice, it's been proven time and again that passively investing in index funds usually provides more consistently good returns than actively picking investments. So, why would I pay someone for potentially worse performance?

3. I know my own goals better than an advisor would

Finally, the last big reason I don't want to pay a financial advisor is that no one is going to understand my money goals or priorities as well as I do. So, rather than spending money and taking the time to explain everything to an advisor, I feel like I'm better off just making a financial plan on my own.

Now, if you're very overwhelmed with how to manage your funds, you may feel like hiring an advisor is worth it. But, before you do, make sure you understand how they charge, what total fees you'll pay, and what exactly they'll do for you that you can't do on your own.