In Working With a Financial Advisor, It Pays to Start Early

BY: Christine Sperry

One of the best things you can do for yourself early in your adult life is start planning your financial future. Some of you are probably thinking you’ve got plenty of time to work on that, but in this instance, time can be your worst enemy. A great starting point is developing a relationship with a trustworthy, knowledgeable, professional financial advisor – someone with whom you’ll develop a financial map for your future, who’ll help you get a feel for the road, and who’ll be there to guide you through any detours you encounter along your way.

Your financial advisor is someone you should be able to speak with candidly – look to family, friends, and co-workers for a reference – so it’s important that you feel comfortable with them. To help you make the most informed decision possible, plan to meet with a few for an initial consultation. In those meetings, discuss where you are today, address concerns you have going forward, and describe your vision for the future. Listening to their suggestions will help you choose with whom you ultimately want to begin your journey.

Once you’ve found your partner, they can set about analyzing your current financial position, assist you in setting reachable goals, suggest courses of action, and guide their implementation. Beyond the initial planning phase, your advisor can be a sounding board, answering questions and illustrating how your future decisions might impact your long-term goals. Some of the areas in which they can offer insight include debt management, 401(k) and other retirement plans, estate planning, combining assets after marriage, life insurance, and saving for emergencies and the future.

As someone just starting out, one of the greatest advantages you have is time – it is truly on your side. By starting to save now, you can take advantage of compound interest, which is interest calculated on the initial principal, inclusive of all the accumulated interest of previous periods of a deposit. It can be simply thought of as “interest on interest,” and it can have a dramatic effect on the value of your money over time.

But let’s see the number – say, hypothetically, you save $6,000 every year until you are 65, and your account generates a 7% rate of return. In the chart below you can see the significant difference, in ending values when you start just 10 years earlier!

Age                                      Total Savings

45                                           $245,973

35                                           $566,765

25                                           $1,197,811

You might be thinking that there’s no way you can save $6,000 a year right now, but the concept still holds – every bit you can save now will help you in the future. If you do not start while you are younger, you will have significantly more work to do further down the line, to catch up.

None of us are born knowing how to read a map or drive a car – we might inherently understand the basics, but to really learn and gain confidence, we need professional help. By engaging with a professional advisor, you will be better prepared to navigate roadblocks and achieve greater success in the years ahead.

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