Figuring out how to manage your money isn’t something that comes intuitively to most people. Instead, it’s a skill people have to learn. I was lucky that I started learning early. Even if you’re a later starter, it’s never too late to take control of your finances.
Thankfully, there are plenty of resources to help you grow on your financial journey. One of those resources is a financial advisor.
Financial advisors typically help people grow their wealth through investing and strategy. Unfortunately, financial advisors tend to only work with people that have already started building assets.
If you’re on a low income, a traditional financial advisor may be out of your reach. Instead, you may get solicited to work with financial advisors that are more like salespeople. They get paid commissions based on the services and investments they sell you. Often, these investments aren’t your best options and could result in you losing a large part of your future returns. Even so, they may be better than not investing at all.
So what can you do to start managing your finances in a better way? How can you find a financial advisor that will work with you even if you have a low income? Here are some ideas to get you started.
Who can benefit from hiring a financial advisor?
Anyone can benefit from the services a professional financial advisor or planner can offer. Financial advisors usually help you build a financial plan. The plan helps guide you to where you want to be in the future. These professionals help create strategies to get you to that future financial position and educate you about methods you may have had no idea about.
For instance, financial advisors can help you understand the tax advantages of different ways of investing. They can also make you aware of tax planning opportunities to help you keep more of the money you work so hard to earn.
Another key benefit of using a financial advisor is getting direct advice about your situation. They can share the results of the potential impacts of making a specific financial decision. These professionals may advise you whether there are better options available, too.
Financial advisors often earn their fees when markets are facing a downturn. People understandably get concerned they may lose a significant amount of money during an economic downturn.
I know first hand that it can be tempting to sell and lock in your losses. These professionals can talk you off the ledge and help you stick to your strategy which is set to work for the long-term.
If you’re looking for a financial advisor – find the best options for you through the Paladin Registry – a free resource.
What if you don’t have a lot of money?
Even if you don’t have a lot of money, financial advisors can be beneficial. If they’re tax-savvy, they can suggest tax credits and other tax advantages you may qualify for as a low-income individual. These could include the saver’s tax credit, the earned income tax credit, and more.
Advisors can help you build a plan to start growing your income and your assets. This type of strategic planning can often benefit from a second set of eyes. Advisors can help from an accountability partner standpoint, too. They can check-in to make sure you’re sticking to the activities you need to complete in order to reach your goals.
Why it is important for people on a low income to have a financial advisor
If you’re a self-starter and educate yourself about personal finance, you may not need a financial advisor right away. In fact, I’ve never had one. That said, people that don’t have the time or don’t care to learn may benefit enormously from the knowledge financial advisors have learned through education and through experience over their careers.
A fiduciary financial advisor, one that must keep your best interests in mind, can help you avoid making costly financial mistakes. Avoiding mistakes is half of the battle of growing wealth.
You don’t have to pay a financial advisor on a recurring basis. You can pay some advisors a flat fee or an hourly rate to develop a financial plan for you. Once you have the plan, you may be able to enact it on your own. You can then hire a financial advisor on an ongoing basis after you’ve started to grow your assets.
Can you get a financial advisor for free?
You might be able to find financial advice for free, but chances are you won’t find a free financial advisor. Financial advisors can be compensated in many ways that make them appear to be free or low cost, though.
However, they may be taking commissions from the amounts you invest or a percentage of your assets each year. This means their services aren’t free, even if you aren’t paying them with cash or a credit card for each visit.
Advisors are in business to make money so you shouldn’t avoid them because of these fees alone. Even so, you need to carefully select a financial advisor that has your best interests in the front of their mind, not the amount of money they’ll make from commissions from selling you products.
Financial advisor services to consider
If you’ve set aside money to pay a financial advisor for advice, here are a couple of options you may want to consider.
The Paladin Registry
The Paladin Registry is a free service that matches you with a financial advisor. The service vets the financial advisors you meet in advance. They also rate the advisors and document essential information you should know about them, such as education, experience, and certifications.
You have to share your portfolio range, which is likely less than $50,000, as well as your name, email address, zip code, and phone number. After you do this, The Paladin Registry matches you with one to three potential financial advisors within 24 to 48 hours that fit your profile that would be willing to work with you.
Once you get your financial advisor matches, you get to interview the advisors to see if they’ll be a good fit. You can also discuss how they’ll be compensated and how they can help you with your specific financial needs. You’re under no obligation to move forward with any of the advisors. If they aren’t a good fit or don’t fit your budget, you can move on to other options.
Facet Wealth may be an option for you if you’ve saved up money for an initial consultation. The company provides virtual consultations with your dedicated CFP fiduciary financial advisor for a yearly fee. You get a free 30-minute consultation call to see if it’s a good fit. If it is, the advisor will create a financial plan tailored to your specific situation.
One crucial distinction is these advisors aren’t incentivized to sell you products you don’t need. They don’t work on commission, so the advice you get is truly objective. They offer low-cost investment portfolios when you’re ready to start investing.
This company works on a yearly subscription model with costs as low as $1,200 per year. That’s as low as $100 per month for access to a dedicated CFP fiduciary financial advisor.
What are your options if you can’t afford a traditional financial advisor?
If you’re living paycheck to paycheck and can’t afford the fees financial advisors charge for one-time or ongoing advice, you aren’t alone.
There are still plenty of places you can get inexpensive or free advice about personal finance or investing. You may have to spend a little bit more time applying concepts to your particular situation, but you can still find the knowledge you need.
Robo-advisors are a great way to learn how to start investing. They use technology to provide some of the investment picking services a financial advisor would offer at a fee lower than most traditional advisors. They usually offer educational resources on their websites for free, as well.
One key aspect that makes robo-advisors accessible to those with low incomes are the low minimums to get started investing. Some robo-advisors have no minimums while others have small minimums that are within reach, such as $100 or $500. Robo-advisors usually offer many educational resources, as well. Here are just a couple to choose from:
Acorns provides investing services for fees as low as $1 per month. This service could be especially useful to those with low incomes because it helps you start investing without directly feeling the pain.
Acorns offers a tool called round-ups. This rounds up your purchases to the nearest dollar. Then, it invests the change. It won’t necessarily build your assets quickly. That said, it’s a great way to get started with the habit of investing. You can also make automatic purchases. These purchases can be scheduled on a daily, weekly, or monthly basis.
Betterment is another option for those without a lot of money to invest. You can get started without any minimum balance requirements. They charge 0.25% of assets under management each year which is much lower than a traditional financial advisor’s 1% assets under management fee.
Betterment uses technology to match you with a portfolio that meets your needs and risk tolerance. They also offer strategies to help you minimize the amount of taxes you pay on your investments and portfolio rebalancing to keep your investments on track.
Also, Betterment is a fiduciary, which means they must keep your best interest in mind when making financial recommendations.
Personal finance books
Personal finance books provide a vast amount of knowledge for the extremely low cost of buying a book. If you borrow the book from the library, it can even be free.
Many financial advisors have written books about managing your money and building wealth. The advice won’t be tailored to your specific situation, but you can pick up plenty of great tips to help you get started.
You may have to read a few books to get a good idea of different strategies. That way, you can pick the one that’s best for you. Make sure to read reviews of the books, as well. Some get outdated and others may offer controversial advice. Reviews may point out areas where you should be cautious following the advice given in a book.
Local and online resources
Local and online resources provide even more knowledge, often for free. Check with the companies you already do business with to see if they offer free financial resources. Be skeptical of any offers, though.
These companies are often trying to sell products that generate more profits. That said, companies like Vanguard or local credit unions may have educational materials you can learn quite a bit from.
You can read through the archives at Money Under 30 to learn about many personal finance topics, too. Other websites also provide a ton of useful information. These range from professional publications such as Kiplinger to other personal finance blogs.
The key is knowing who to trust and verifying the information with reputable sources. After all, not everything on the internet is true.
Getting financial advice when you have a low income isn’t easy. Many financial advisors won’t work with you because you don’t have any assets they can manage. Then, some of the advisors that will work with you charge outrageous fees.
Consider the options listed above to find financial resources that fit your budget and situation. Then, take action to start improving your finances and growing your wealth. Eventually, you may be able to hire a traditional financial advisor if you still feel it is in your best interest at that time.