By Brad Pareso
Picture this scenario: it’s 2047 and you are getting ready to retire. After working for most of your life, you want to pack it in and enjoy some of the finer things in life: a new flying car, a summer house on Mars and any other luxuries the future brings.
So, you go to your financial advisor and tell him/her to withdraw your money. They grab a couple of those stainless-steel briefcases from every heist movie ever made and you walk out with $1 million dollars. How much money do you think you have to invest to make this a reality?
Twenty dollars per week. Yep, that’s it. A few drinks at a bar, another shade of lip stick and bronzer, a DVD. Set aside $20 every week for 40 years puts $41,600 in play ($20 times 2,080 weeks between now and 2047). Put that in a mutual fund with a 12 percent return, you can turn that $41,600 into just north of $1 million.Put that in a mutual fund with a 12 percent return, you can turn that $41,600 into just north of $1 million.
But what’s that you say? What’s a mutual fund? Isn’t 12 percent a high return? I can’t be bothered to handle investing myself. That’s ok.
Just like when you take your car to a mechanic because you don’t know how to get rid of "that funny noise," there are plenty of professionals - some who are very good - to manage your money in a way that doesn’t require any huge sacrifices on your part.
Let's go over who these folks are....
Financial Planners are your jack-of-all-trades advisors when it comes to personal finance. They might not be specialists in a specific area, but they can give you general knowledge about the ins and outs of financial planning. Here are several types of financial planners.
They are able to develop and tailor a financial plan unique to you by offering options better suited to young people, such as an index fund versus an IRA. However, their services won’t come for free - fee-only planners work on an hourly rate, but make no money off commission.
As the name suggests, they make their money strictly from commission and don’t charge a flat hourly rate. This may sound appealing, but be watchful of what a commission-only planner tries to sell you. Something that has a greater commission rate means they get paid more, but might not be the best option for you.Fee and Commission Planners--Essentially the same as a fee-only planner, except they also take a portion of the money made on your investment as commission. Because of this, fee and commission planners typically cost more than a fee-only planner.