When Should I Hire a Financial Advisor? Money Questions Therapists Should Ask
GUEST POST BY DAVID FRANK OF TURNING POINT HQ
A financial planner is a specific type of financial advisor. While a financial advisor can do financial planning, many focus more on assets and investment management. On the other hand, a financial planner focuses on helping clients understand the holistic elements of their finances. In this piece, I'll cover questions you may ask yourself about your personal and business finances that could lead to hiring a financial planner as a self-employed therapist.
Managing money and finances can be overwhelming. That's true for pretty much everyone. And it's especially true when you are self-employed. As a therapist in private practice, not only do you need to stay on top of your financial situation, you have to manage your private practice finances as well.
Given all you have to manage, hiring a financial planner could help. In this piece, I’ll cover questions to ask yourself to help you decide when you should hire a financial advisor. Here are some common situations where it makes sense to consult with a financial planner.
I can't seem to save. I don't understand what happens to my money every month!
If you're struggling to put money toward savings, or don't understand where your money goes every month, that can be a great time to work with a financial planner. The right financial planner can help you clarify how money flows into and out of your life. They can introduce you to a variety of tools to help you align your spending with your values.
The right professional won’t force you into a rigid budget or shame or judge you for how you are spending your money. Instead, they’ll help you align your use of money with your most important goals. And a good financial planner can help you find the system that works best for you without feeling like a burden, a key for therapists working on cultivating a healthy relationship with money.
I’m not sure if I’m on the right track financially.
As a financial planner, folks often want me to help them answer if they’re on the right track. They want to know if they’re saving enough for retirement or if they’re overlooking anything important. There are so many competing financial priorities in life, and it can be overwhelming to evaluate them all, let alone to have confidence you’ve handled everything the right way.
A comprehensive financial planner will help you put together a holistic financial plan for your life. That plan will help you feel confident you’ve thought of all the right things and have a plan in place to address them. Personal finance is just that: personal. There are few, if any, financial moves that will be right for everyone. A comprehensive financial planner can help tailor a plan that supports your values, goals, and vision for a great life (kind of like what a great therapist will do!).
I’m overwhelmed by my student loan debt.
If you are overwhelmed by your student loan debt, you aren’t alone. It's exceedingly common for therapists to have well over $100,000 in Federal student loans. Having that level of debt can feel scary and overwhelming. If you’re not sure of the right way to manage your student loan debt, working with a financial planner who has student loan expertise can help you move forward with confidence.
The good news is there are many great options for managing your federal student loans. The bad news is that choosing from all those options is confusing and requires technical analysis. Working with a financial planner to help you navigate this maze can be helpful. The right planner can help you move through uncertainty and confusion and toward a place where you feel confident you’ve made an informed decision about the best student loan repayment or forgiveness strategy.
The truth is, the only way to get into trouble with your student loans is to ignore them. Avoidance to overwhelm is a natural response, but unfortunately, avoiding your student loans makes the problem worse. I wish more student loan borrowers knew there were ethical finance professionals to help them make informed decisions about their student loans. (Lindsay’s note—I’ve got a great podcast with the owner of Loan Sense, a service that helps student loan borrowers understand their best plan for paying back their loans you can listen to here).
How do I handle my private practice bookkeeping & taxes?
Handling private practice taxes and bookkeeping is important. When you step out into private practice, all of a sudden, you're the CFO of your small business and responsible for bookkeeping, accounting, and managing your taxes. This new responsibility is overwhelming and confusing for virtually everyone who starts a small business.
While there's a ton of information online, it's challenging to know what advice fits your business. And online forums, like Facebook groups, tend to be filled with well-intentioned but often inaccurate recommendations.
A financial planner specializing in working with small business owners, or better yet private practice owners, can help you understand the financial needs of your particular business. They can help put in place a financial management plan that meets your needs and complies with your state and local tax landscape.
Is buying a house a smart investment?
Buying a house is a big commitment, and if you're contemplating taking that leap, it might be a great time to work with a financial planner. They will help you understand if buying a house is a good investment and how much house you can afford without shortchanging other important financial goals (like saving for retirement). There are a lot of factors to consider here, and lenders will often approve you for a larger mortgage than you can comfortably borrow. Working with a financial planner who doesn't benefit financially from the amount of money you borrow can be a great way to make sure your home purchase isn’t one you later regret.
Am I on track for retirement? And which plan is right as a self-employed therapist?
Saving for retirement is one of those things we all know we should be doing, but sometimes getting started can feel tremendously overwhelming. You have to navigate a veritable alphabet soup of retirement plan options: IRAs, Roths, 401(k)’s, SEP-IRAs - just to name a few!
Retirement plans offer great tax benefits that are genuinely too good to pass up - but they also come with tons of rules which can be challenging to decipher. And if you own a group practice with employees, the rules get even MORE complex.
Hiring a financial planner to help put in place a retirement plan for you (and your employees) can be a great way to take advantage of their benefits without running afoul of IRS rules and make sure you’re on track for retirement.
Why should I invest?
The world of investing is overwhelming. It feels like something we should be doing for many of us, but we’re not sure where to begin. And it can be tough to know which investment advice is trustworthy and what is probably a scam.
Helping you devise a thoughtful investing plan that fits your long-term goals is something a good financial planner can help you with. But you do need to be careful who you hire. Sadly, too many financial advisors are glorified salespeople who profit by steering you toward proprietary investments - which often are not in your best interest. I always recommend folks work with fee-only, fiduciary (Lindsay’s note—a “fiduciary” is a person or organization must put their clients' interests ahead of their own) financial planners to minimize these conflicts of interest. A good financial planner can act as your “investing 101” guide, helping you decide on an investment strategy in line with your needs as a self-employed therapist. Be sure and read to the end of this post where I share some helpful resources to help find a trustworthy advisor.
How will I pay for my kid’s college education?
Putting children through college is one of the most financially daunting tasks any parent faces. Whether your kids are young and you're wondering how to start saving, or you've got high schoolers about to graduate, a good financial planner can help you understand your options to pay for your child’s college education.
College funding is a complex area, but there are a ton of great options. Making informed choices that will set both you and your future graduate up for long-term success is an area a good comprehensive financial planner can help you navigate confidently.
Therapists: Find the right financial planner for you and your money!
A good financial planner can help you navigate so many important areas of your financial life. Thankfully, there are many great financial professionals out there who will help you navigate all manner of financial challenges. Typically, these financial professionals will call themselves a comprehensive financial planner.
Titles in the financial industry vary widely and aren't regulated or standardized as they are in the mental health field. You'll need to do a bit of research to understand the expertise and focus of the particular financial professional you’re considering. Make sure they have experience and expertise in the area you most need help with as you search for a financial planner for the self-employed.
And as I mentioned earlier, you do need to be careful when hiring a financial professional. I recommend you work with a fee-only, fiduciary financial advisor to minimize conflicts of interest. The Certified Financial Planner’s Board of Standards also provides an excellent list of 10 Questions to Ask Your Financial Advisor. These questions will help you find an advisor that’s a good fit and charges fees in a way that allows them to put your financial interests ahead of their own.
I recommend you interview a handful of potential advisors so you can ask these important questions and get a sense of whether there is a good fit between the two of you. Just like in the world of mental health, finding a financial planner who’s a good fit greatly impacts how successful and impactful the work you do together will be.
Money touches virtually every aspect of our lives. When you find the right financial planner for you, that relationship can not only improve how you feel about your money as a therapist, but can transform how you lead your life! I encourage you to do the work and find the right professional for you! Your future self will thank you.
