DIY financial planning makes sense for some investors but can come with high costs for others.
Your financial needs are generally straightforward at the start of your journey. But as your financial life becomes more complex, the equation often changes. Instead of saving money by managing everything yourself, DIY financial planning can potentially cost you big.
Unfortunately, the true price tag isn’t always what it seems. That’s because many costs associated with DIY financial planning aren’t obvious. And when you don’t know what you don’t know, these costs can quickly pile up.
On the other hand, an experienced financial planner can help you uncover your financial blind spots and identify strategies to save you time and money.
Before going it alone, consider the following potential costs of DIY financial planning:
#1: Time
Developing a comprehensive financial plan takes time. It involves a detailed review of your entire financial picture, from cash flow to investment accounts and everything in between.
Initially, you may not need more than a budget and plan to automate your savings and retirement account contributions. However, as you accumulate wealth, your financial situation often grows more complex and in turn, requires more of your time. At the same time, you probably have less time to spend on managing your finances as your responsibilities at home and at work demand your attention.
Meanwhile, you may have a growing family, which adds to the complexity of your financial needs. For example, instead of planning for just your retirement, you may also be juggling college savings for your kids, family vacations, and taking care of your aging parents. Working with a financial planner can offload the burden of DIY financial planning, freeing up valuable time in the process.
#2: Energy
In addition to demanding your time, DIY financial planning can drain your energy if you don’t have a passion for personal finance. Indeed, personal financial management requires a comprehensive knowledge base of financial planning and investing basics. And while educating yourself on these topics is certainly possible, it may feel like a chore in the end.
Accounting for all aspects of your financial situation can be daunting—not to mention stressful if you’re not confident about your decisions. Delegating your financial planning needs to a trustworthy financial planner allows you to focus your energy on something you find more rewarding.
#3: Peace of Mind
Perhaps one of the of the most significant potential costs of DIY financial planning is peace of mind. As your financial needs grow more complex, you may develop certain blind spots. In other words, you don’t know what you should be thinking about when it comes to your financial future.
This kind of uncertainty, especially during volatile markets like we’ve experienced this year, can rob you of your peace of mind and lead to sleepless nights and unnecessary stress.
While it’s hard to quantify something like peace of mind, here are some signals that it may be costing you big:
- You often wonder whether you’re on track for retirement or not.
- You lay awake at night wondering if your family finances are in a healthy position.
- You worry that you’re investing your money wrong.
If you’ve found yourself losing sleep over your finances or constantly worrying about the future, it may be time to seek the help of a financial professional.
#4: Your relationship
With 7 in 10 married Americans experiencing a money disagreement in the last year, one of the most valuable but often underrated benefits of working with a financial planner is the stress it can take off your relationship.
Whether one person takes the lead in the family finances or it’s a joint effort, DIY financial planning can begin to take its toll on your relationship as your net worth and financial planning needs grow. You and your partner may quickly find yourselves in over your heads, which can lead to doubt, uncertainty, and conflict.
Offloading this responsibility to a financial professional can take some of the pressure off your relationship. Rather than debating important financial decisions with your spouse, you can both turn to your financial planner for expert advice and recommendations.
#5: Taxes
When it comes to DIY financial planning, failing to consider the potential tax implications of a financial decision can cost you significantly. This is especially true as you accumulate wealth and climb to a higher tax bracket. Unfortunately, most people who don’t study the tax code for a living don’t fully understand it or the tax-saving strategies available to them.
On the other hand, tax planning can be one of the most valuable aspects of delegating your financial planning needs to a professional. Indeed, a well-rounded financial plan will include a list of tax-saving opportunities and recommendations. At Milestone Asset Management Group, for example, we have tax professionals in-house who can consult on tax planning strategies and help minimize our clients’ year-end tax liability.
#6: Financial Security
It’s hard to put a price tag on financial security, especially since this often means different things to different people. For some, financial security means having a year’s worth of expenses saved for an emergency. For others, it means knowing they have enough life insurance to provide for their family in the worst-case scenario.
No matter how you define it, financial security is another potential cost of DIY financial planning. Most DIYers can tackle the easy stuff—ensuring they have an emergency fund and basic insurance coverage. But few will be able to take the next step—for example, creating a comprehensive estate plan that addresses all of your objectives.
Ultimately, financial planning isn’t just about growing your wealth. It’s also about protecting your assets so that you, your loved ones, and your legacy are protected. Working with a financial planner instead of going it alone can help you ensure your future is secure.
#7: Financial Goals
Ultimately, the highest potential cost of DIY financial planning is falling short of your financial goals. This may mean not retiring on your terms, falling short of your college savings goals, or simply not being able to live the life you want.
As a DIYer, knowing when you’re on track towards your goals and when you’re at risk of falling short can be challenging. And when you’re falling short, it can be even more difficult to know how to adjust your approach to get back on the right track.
This is the true value of working with an experienced financial planner. When you have an ongoing relationship with a trusted advisor, they constantly monitor, update, and adjust your financial plan as needed. Their job is to track your progress towards your financial goals and help you course correct when you’re off track.
Our Team Can Help You Avoid the Potential Costs of DIY Financial Planning
Working with a financial planner may seem like an unnecessary cost, especially when your financial needs are relatively simple. However, as you accumulate wealth and your needs become more complex, delegating your planning needs to a professional can save you precious resources in the long run.
At Milestone Asset Management Group, we offer our clients the peace of mind that comes from working with a trusted and experienced financial advisor. We specialize in helping our clients plan for a healthy and secure retirement while handling all of their tax planning, preparation, and estate planning needs in-house. To speak with a member of our team about how we may be able to help you achieve your financial goals, please schedule a call.
