In part, that’s because the word “financial” covers a lot of territory in our lives. People who report financial stress could be worried about their salary not stretching far enough, about not being able to save for a house, about large student loans or credit card balances that sap their disposable income, or about not knowing enough about investments or taxes. And that’s just the tip of the iceberg – they could be worried about a host of other things as well.
So how can you eliminate financial stress from your life? First, it’s a good idea to work with an independent financial advisor who follows a fiduciary standard and will put your best interests ahead of their own. They work with people at all stages of income and financial knowledge. If you don’t know a lot about areas, they educate and inform. Here’s how an independent financial advisor in the Bay Area can help relieve your stress.
1. Create a budget
A financial advisor can work with you to create a budget (or refine one if you already keep track of your income and expenses). Although the word “budget” has some connotations of scrimping and saving to some people, it’s definitely not about that. A budget is a type of cash flow statement, recording your total income and total expenses every month.
The purpose of creating a budget and working with one is to manage your financial life more effectively. It provides a roadmap to measure essential criteria. Are you living within your income, for example? If you’re not, you’re probably going to have a problem meeting your expenses, and you might even be racking up debt. With a budget, you can look at your expenses to see which ones might be whittled down or (conversely) how much you can seek to raise your income.
Another important criterion is how much disposable income you have to save. Everyone needs some savings for unexpected events, investments, and retirement. Once you see how much you have, you can plan accordingly.
Budgets are fear and anxiety busters. Budgets can provide a road to clarity if you worry about not having enough to pay your bills, worry about spending too much, or don’t know how much you can reasonably spend on something you want. Once you know your spending and income, you can make a plan to change it or stay on the same road.
2. Help you define your goals
A comprehensive financial plan is all about helping you to pursue your goals. An independent financial advisor will discuss your financial goals with you because your financial plan depends on them. Do you want to buy a house or trade up? Do you want to travel? Start a business? Save more for retirement? Make sure you can provide for a family? All of these and more can be goals.
Once you define your goals, a Bay Area independent financial advisor can help you set up a plan to pursue them.
3. Recommend an emergency fund for unexpected events
Financial advisors generally recommend that people save from three to six months’ worth of salary in an emergency fund. These funds are designed to cover you when the unexpected hits – anything from a large car repair bill to time off work to recuperate from surgery and more.
Folks who don’t have an emergency fund as a cushion may still encounter the unexpected – we all do. But they may have to go into debt to pay for the unexpected, which can be a problem. The more your income is soaked up by debt service, the less of it you have to spend on pursuing your goals.
4. Help you manage debt
Not everyone has debt, but many Americans do – and many Americans have a lot of it. The key to debt is managing it. If you have debt, a financial advisor can look at what you can do to reduce the payments. This can include a plan for paying it off using efficient methods (such as prioritizing the smallest amount or the highest interest rate debt first).
It can also include methods of reducing your payments, such as consolidating high-interest rate credit card debt with a lower interest rate personal loan, refinancing student loans or mortgages, or multiple other methods.
5. Help you manage risk
One of the lesser-known services financial advisors offer is risk management. You need to be adequately insured, and many people don’t really consider insurance as part of their financial lives.
Think about it, though. If your home suffered damage in some way (fire, flood, another natural disaster, or an event such as a burglary or forced entry), you’d have to repair it. If your belongings are damaged or destroyed, you’d have to replace them. Both are high costs, but having sufficient homeowner’s or renter’s insurance eliminates that potential financial strain.
The same is true of other assets, such as cars. You need insurance at a reasonable deductible in case of damage to your vehicle.
If you have financial dependents, such as a spouse, children, or older relatives, you need to have life insurance in the event of your demise. Life insurance may be unnecessary if you don’t have dependents.
A financial advisor will help you review your risk coverage and suggest appropriate actions if need be.
6. Provide investment and retirement advice
When deciding between investments or retirement accounts, it’s prudent to have independent financial advice. A financial advisor can help you choose what asset classes are best to invest in, given your situation, goals, age, risk tolerance, and income level (stocks, bonds, or cash). They can advise you on specific choices within those asset classes, such as particular stocks, bonds, or mutual funds.
A financial advisor can also help you plan appropriately for your retirement investments by devising how much you need to save for retirement. They can also help you to mitigate tax liability through appropriate tax-advantaged investments. After all, the less tax you pay, the more of your money stays with you!
A single governing principle founded Humanity Wealth Advisors: The everyday individual is our greatest bottom line. That’s why our team is committed to your success.
With over 20 years of financial experience, we help our clients develop a clear, holistic plan to build their financial futures. When you’re ready to pursue financial planning, contact our team of friendly, reliable professionals.