With financial adulthood comes a series of firsts – apartments, loan payments, and other complex decisions, all of which are made while rent is high and paychecks are low.
So what if this young adult could entrust himself to a trained, trustworthy guide on his way into the world of work, someone who could share the magic of compound interest or who could show how saving little money with 22 instead of 32 hundreds could turn out to be of thousands of dollars later?
When you’re around someone entering this new phase – whether from high school, graduate school, or anywhere in between – the gift of professional advice can be one of the most efficient ways to get him or her on the right track.
There are many ways professionals can help, whether by deciphering health insurance plans or finding a new 401 (k) or other retirement plan useful. Many college graduates have already made at least one huge decision by taking out higher education loans – and may be stressed out about how they will make it when those loans mature this year.
Financial know-how comes in many forms so that highly motivated people can find their way around on their own. But there are plenty of snake oil sellers out there, and TikTok videos and crypto hype pals don’t always give educated advice. Providing a few hundred dollars as a guide can help you avoid more costly mistakes while also providing the help you need to make more informed financial decisions – even if that’s not the cheapest option in the chart.
“I often make plans where people don’t necessarily do what is mathematically optimal, but it’s right for them,” says Cristina Guglielmetti, a financial planner in Brooklyn who offers a package for new graduates.
The good news: financial advice has become more affordable in recent years. Here’s what a new graduate is likely to explore during a session, how to find the right professional, and where to potentially find help that you don’t have to pay for.
Basics and a budget
A major focus will almost certainly be getting a handle on your cash flow and overall money management.
“If I can find someone fresh, I would ask them to look at what their life should be like five or ten years from now and find out what it takes financially,” said Anna N’Jie-Konte, a financial planner in Maryland.
After the money has been set aside for the most important things like rent and food, it helps to formulate sensible savings goals. Everything that is left goes to discretionary spending. Finding the right formula can take a little tweaking, but it sets up the finances so a new graduate doesn’t have to think too much about budgeting – essentially spending what is left.
Ms. Guglielmetti called it a possibility to become a safe number again and to provide a “guardrail against the lifestyle creeper”.
New graduates can get help with things as simple as reading a pay slip full of acronyms. Financial planners can also advise them on how to set up a 401 (k) or other retirement account and choose investment options, decide what to do if they are offered stock compensation, and automate their financial life as much as possible.
Find the right fit
Financial advisors have long had a reputation for being older, manly, and geared towards wealthier families.
“For a large segment of the population, there was a time when this advisor didn’t have much in common with them,” said Kevin Mahoney, Washington, DC financial planner who focuses on millennials. “That is no longer the case.”
It is a good idea to look for a colleague – or someone who is more empathic with their situation, in order to give graduates access to someone who is in tune with their background and needs.
But personality also plays a role: when contacting potential counselors, pay attention to what kind of questions they are asking and in what order. Some professionals may focus more on numbers, spreadsheets, and tactics, which may be fine for certain graduates. But others can benefit from a counselor who is individual first and sensitive to the emotional aspects of money.
Mr. Mahoney said many people have never been asked what is causing the most stress in their finances and that they will be given the opportunity to think about it if a better plan could come up. For example, they can make their student loans nervous because they grew up in a household with high debt, which can affect a counselor’s recommendations.
And empathy for those feelings can attract an otherwise reticent young person. “You can see it on people’s faces – they just start walking,” said Mr. Mahoney.
He also reiterated Ms. Guglielmetti’s point of view that what appears ideal on the spreadsheet is not always the most important thing. “To some people, the thought of paying back debt for 20 or 25 years – even if the math says it is the best decision – feels crippling,” he said. “If this strategy makes them less optimistic or confident about managing their money, they may not make much financial progress in the long run and will likely need to take a different approach no matter what the math says.”
Fees and Trustees
A younger adult probably won’t need more than a meeting or two – maybe one in depth and one shorter. You can expect to pay anywhere from $ 200 to $ 450 an hour, or maybe $ 500 for a package. And if you’re a new graduate looking for advice on your own, don’t be afraid to ask for a payment plan – or pay in a few installments, experts said.
The XY Planning Network, Garrett Planning Network, and the National Association of Personal Financial Advisors are member organizations that are made up of hundreds of certified financial planners who charge for their time and services but do not make any money or commissions on products sold that help To minimize conflict of interest. Specifically, you can find planners who bill on an hourly or project-by-project basis – in other words, you can pay them a flat fee, while more traditional planners require a minimum asset and charge a percentage of those assets.
The planners of the corporations also work as trustees, which means that they have to put the interests of their customers in the foreground. If an advisor doesn’t promise to act as a trustee, find someone else to do so.
If your graduate will pay for the work himself, they may be able to find a professional who is willing to volunteer – something that is more common during the pandemic, experts said.
And professional counselors have said that sometimes they may not be the best option, such as when graduates are trying to pay off credit card debt. For them, Mr Mahoney said, he tends to suggest financial coaches who may be less expensive and can provide online materials and videos to help clients overcome their debts.
There are also services available, including the Student Loan Advisor Institute, which offers free advice to help students find the right path when student debt is their biggest concern.
There are ways this gift can go very wrong: if the graduate doesn’t shop, or if the adult who does the gifting gets too pushy. Financial advisors warn that adults need to give the gift, then step back and let the professionals do their job.
It is important that your new graduate is comfortable speaking to the counselor, and this may not be possible with a family member standing over their shoulder.
“The person has to be on board and you get pretty deep with this stuff so that they have to be ready,” said Ms. Guglielmetti. “My client is the graduate, not the parent.”