Financial Products You (Probably) Don’t Need

My twenty something friends sometimes ask me whether they should hire a financial advisor. Usually, they have just read an article or heard a high-pressure marketing spiel. The fact is, unless you have over $100,000 in investments, you don’t need a financial advisor or planner. Here are five financial services you probably won’t need before turning 30, and why.

Financial products you probably don’t need

Financial planning: Financial planners (or advisors) recommend investments to help you meet long-term financial goals like retirement or paying for your children’s education. Some charge an hourly rate (called fee-only planners) while others earn a commission from investments they sell you. Either way, financial planners are best for investors with mature portfolios. They may offer a customized financial plan for a few hundred bucks. Skip it, save the cash, and read blogs like mine instead!

Life insurance: Single people don’t need life insurance. If you die, you have nobody to support, and your student loan and credit card debts will be erased. End of story. Once you’re married or have children, life insurance becomes a financial product to carefully consider. But not until then.

Credit monitoring: Several outfits sell credit monitoring services for a few bucks a month. Seen the ads for your “free” credit report? It’s actually these guys tricking you into buying a credit monitoring subscription. The monitoring service will send alerts anytime your credit report changes. Everybody can check their credit for free once a year without this service, however. On the flip side, identify theft victims or consumers obsessed with improving their credit score may find these services worthwhile.

Cash advance checks: I once had a credit card send me “cash access checks” once a week without fail. Why? Because I had a big fat credit limit, and they wanted me to use it. Depositing these checks often results in high transaction fees and, sometimes, a super-high “cash advance” interest rate. Even if the checks come fee-free and/or with a low teaser interest rate (check the tiny print), borrowing money for cash or bills is a sign of financial trouble, and only makes matters worse. Skip these unless you can use checks with a low rate and no transaction fee to pay off a balance on a higher rate credit card.

Financial products you definitely don’t need

Credit repair: Ok, this one you definitely don’t need. Any company claiming they can “repair” your credit is one step short of scamming you. These companies charge hundreds of dollars to do things you can do for yourself: Check your credit and challenge inaccuracies. If your credit report is grossly inaccurate due to identity theft, you might consider carefully selecting a lawyer to help you restore it. Otherwise, the only path to good credit is to pay down your debts and pay your bills on time.

Credit protection: Almost every credit card offers some kind of credit protection or credit insurance. You’ll see ads on your statements, or get calls from your credit card hawking it. For a monthly fee of about 1% of your balance, your credit card will suspend payments if you lose your job or become disabled, and forgive your debt should you die. Well, if you die, unsecured debt is settled against your estate. If your estate is nonexistent, the debt is gone anyway! Plus, if you’re laid off or disabled, most creditors will offer payment flexibility anyway, as long as you call them.

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