It’s Time to Be Your Own Wealth Manager, Here’s How and Why #ThanksCongress
The truth is that anyone making a fair bit of money (in the upper 5 figures and 6’s) should seriously consider consulting a wealth manager, a good wealth manager. A high caliber financial planner can look at your financial situation with perspective. They can advise you on your financial goals, inform you of various of investment opportunities, help you manage risk, select the right mortgages, and reduce your tax liability. That said, a bad wealth manager won’t be concerned with your success or financial needs. Instead they’ll be likely to steer you towards a select number of financial products in order to get kickbacks from the funds they work with and will generally look to line their own pockets, not yours. It’s been illegal for financial planner to not act in the best interest of their clients since July 2010 but that may be changing in short order.
President Trump has asked Congress to roll back the financial protections it enacted after the 2008 economic collapse, the Dodd-Frank Act. Dodd-Frank protects average Americans through regulations for banks and financial advisors. Learn why you should care about Dodd-Frank’s repeal and how to protect your assets by acting as your own wealth manager.
Why You Should Care About a Dodd-Frank Repeal
President Trump has said that Dodd-Frank curbs shareholder profits and makes it difficult for borrowers to obtain loans. Yet without Dodd-Frank, there is no guarantee a financial advisor will look out for your interests. Prior to Dodd-Frank, many financial advisors managed their clients’ money in a disastrous ways. Indeed, they were less interested in doing right for the clients and more interested in amassing wealth for themselves.
Dodd-Frank introduced a fiduciary rule (among a slew of others) which mandated that financial advisors who manage retirement accounts must work in their clients’ best interests, rather than their own. Without Dodd-Frank, nothing prevents your financial advisor from using your investment account to boost their profits.
If the new regulatory rollbacks make you weary of working with wealth managers, learning to manage your money yourself may be a better move.
How to Be Your Own Wealth Manager
Get a Handle on your Finance
The first step in managing your money is getting a handle on your finances. Take stock of all your debt, income, and assets. (everything from your car and house to your life insurance policy). Then come up with financial goals. Maybe you want to save for a down payment for a home, or open a college savings account for a child or grandchild. It’s important to have a mix of short vs. long term goals. For instance paying off your student loans vs. saving for retirement.
Design your Action Plan
Once you understand your finances, you need an action plan. This one is dedicated to cover your investments, insurance, taxes, and estate planning — the four cornerstones of financial planning, whether you’re working with an advisor or managing your wealth on your own.
Develop a Budget
Develop a budget that allows you to live comfortably and save for your goals. If you have a goal of saving 10 percent of every paycheck toward a home down payment and paying $100 extra toward your student loans every month, you can put this into action with two simple steps: #1. Automate the extra student loan payment once a month. #2. Automatically transfer 10 percent of every paycheck to a savings account.
Grow your Wealth
Next, shift your focus on growing your wealth and reducing your tax liability through a retirement account. For instance, target date funds might be something you want to look into to start maximizing your retirement savings. These funds invest in risky assets when the maturity date is far off. Then shift to more conservative holdings as the target date gets closer. By reducing your risk as you move closer toward retirement, these funds enable you to reap the potential benefits of assuming some risk early on.
Take time every month to educate yourself about some aspect of financial planning. The more you learn the more you can use your newfound knowledge to make smart money decisions. It can either be through books, magazine subscriptions or classes at your local community college. If you are working with a financial adviser, you will notice your education makes it easier to understand their advice. You will also be able to ask questions about how your portfolio is managed.
With these basics, you can be your own wealth manager. Knowing where your money goes and working hard to make wise investments in your future is the ultimate reward.