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Building wealth is a journey, and there are times when we need a little support along the way. Just like a therapist can help you work through your emotions, or a personal trainer can push you to new fitness heights, a financial planner can help you zero in on your financial goals. But where do you start? These 10 questions can help you maximize your financial planning sessions and prepare for whatever comes next in your life. (And don’t forget: If you subscribe to SoFi Plus — or have an eligible direct deposit with SoFi — you’ll get unlimited access to virtual financial planning sessions. All SoFi members get an initial 30-minute consultation at no cost too. Just download the SoFi app and register.) 1. Why should I work with you? It may sound blunt, but it’s the most important question. Get a feel for their working style and priorities, and (if possible) get recommendations from other clients. You should also properly vet them. Find out:• How they are paid: The National Association of Personal Financial Advisors (NAPFA) recommends a “fee only” method of compensation (meaning no commissions) in order to reduce conflicts of interest and increase transparency.
• What licenses they hold: Are they a Certified Financial Planner® or Chartered Financial Analyst?
• Whether they’ve had any disciplinary actions taken against them: Checking the CFP Board’s database and FINRA’s Broker Check is a good start. 2. How does my current financial health look? Besides meeting all of your monthly obligations, are you on track to achieving your financial goals? A financial planner can give you an honest assessment of your overall financial health and how prepared you are for the future. You should come away knowing where you stand not only with your monthly income and expenses, but retirement and college savings, investments, and debt payments. 3. Am I prepared for an emergency? Many experts recommend having enough cash to cover at least three to six months’ worth of basic living expenses. And the median (aka typical) emergency savings amount among U.S. workers is just $5,000, according to a recent survey from the Transamerica Center for Retirement Studies. In fact, 40% of Americans surveyed by U.S. News & World Report in January said they didn’t have enough cash or savings to cover a $1,000 emergency expense. Ask your financial planner how much you should have in your emergency fund (this SoFi calculator can help), and how best to build that savings up so you’re covered when you need it most. 4. What’s the best way to conquer my debt? Nearly 2 in 3 U.S. credit card holders with debt said they have delayed or avoided financial decisions because of that debt, according to a Bankrate survey. If your credit card bills are stifling your plans, loop your financial planner in ASAP to discuss payoff strategies (like the debt snowball method). You can also ask if debt consolidation or credit counseling might be warranted. 5. How much should I be saving for retirement? There are lots of different ways to estimate what you’ll need in retirement, including having a certain multiple of your annual salary saved by the time you’re 30, 40, etc. Your financial planner can show you what you’re projected to have by your target retirement date at your current savings rate, based on benchmarks, as well as explore whether there are opportunities to adjust your investment strategy or sock more money away. (For example, by using a Health Savings Account in addition to a 401(k) and/or IRA.) What’s key is sharing your vision for your retirement. Will you travel a lot? Do you plan to downsize your home? Will you continue to work part-time? Those insights can help them help you. 6. Am I taking on the right amount of risk with my investments? This past April had some of the biggest one-day stock market swings in decades, so it’s natural to wonder about risk — and feel a little skittish. And a lot depends on your own risk tolerance, which you’ll want to assess with your financial planner. But as a rule of thumb, the younger you are, the more risk you can generally take on with your investment portfolio — assuming you’re playing the long game. In other words, if you’re saving for retirement and have decades to go, you’ve got more time to recover from downturns and weather the market’s ups-and-downs. If you’re nearing retirement age, however, you have a shorter horizon, which could lower your risk tolerance. Your financial planner can weigh the risks and your time horizon to help you determine how much to keep invested in stocks vs. bonds, and how much cash to hold. 7. Is my money working hard enough for me? You’ve worked hard for your money, but is it working for you? Cash tends to lose value over time because of inflation. If you have a lot of idle cash, you may be losing out on opportunities to earn passive interest or investment income. One survey suggested that 82% of Americans aren’t even using a high-yield savings account. Talk to your financial planner about how you can leverage the markets (and the power of compound returns) to maximize growth potential in a way that suits your risk tolerance. 8. How should I plan for major life events, such as buying a home, having children, or sending my kids to college? The average cost of college has more than doubled since 2000. Mortgage rates and property prices have made it increasingly unaffordable to buy a house. And childcare and healthcare costs can feel prohibitive. Ask your financial planner how you can best prepare for the financial milestones you have ahead of you, including by using tax-advantaged accounts. 9. How can I protect my family in case something happens to me? A will and a life insurance policy can help safeguard your loved ones’ financial future, but only if you’ve planned ahead. Just 31% of U.S. adults have a will, according to Trust & Will. And choosing the best type of life insurance for your situation (like term vs whole life policies) can feel complicated. Ask a financial planner to help you strategize the best approach to make sure your family is taken care of. 10. What’s next? End every session by asking about next steps. What should be on your to-do list? When should the next check-in be? How (and how often) can you reach out with questions? Finances can be stressful, but talking things out with an expert can help ease your mind and prepare you for whatever economic headwinds come next. And whether you choose to work with a financial planner or not, remember: Knowledge is power. The more you educate yourself, the more control you’ll have over your financial future.
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