In my last post, I explained the four steps you should take by age 40 that will give you a solid base to build your financial life. These are the six professionals that you should be working with.
ACCOUNTANT
In your 20s, you probably used a do-it-yourself tax preparation solution such as Turbo Tax. This program can be excellent when your finances are relatively straightforward, but its limitations become apparent as your wealth grows. As your financial life gets more complicated, you will benefit by working with a CPA to prepare your taxes. Taxes are an area where the saying 'You don't know what you don't know' becomes vital since a professional can help you find opportunities to reduce your tax bill and avoid mistakes that you might have missed otherwise.
MORTGAGE BROKER
The chances are that if you haven't already bought a home, you are actively saving for one. Understand the difference between a broker versus an agent. The broker represents you, while the agent represents the lender. A broker has access to multiple lenders and could help you find the best loan at the best rate. Brokers can help you when down the road you may want to add a Line of Credit or explore some other way of accessing the equity in your home. Ask friends and family for recommendations and interview the various individuals to identify whom you feel comfortable working with.
REAL ESTATE BROKER vs. AGENT vs. REALTOR
There are three types of real estate professionals that you can use to buy or sell a home, a real estate agent, a broker, and a realtor. It is important to note that all must be licensed and trained, but there are differences between the three. A real estate agent works for a specific brokerage firm. A broker has completed more training and can work independently or with other brokers, and a realtor is a member of the National Association of Realtors (NAR). Membership in this group means they must adhere to a Code of Ethics established by the organization.
When deciding which type of professional to work with, I suggest you ask if they represent the seller or the buyer? What is their marketing plan to sell your home or find you a home, how well do they know the geographic area where you are looking to buy or sell, do they have references, how do they get paid, how do they communicate with you, how often do they communicate?
In general, they should have experience, knowledge, contacts, and your best interest in mind.
INSURANCE AGENT
There are many different types of insurance, but the big-picture categories for a person in their 30s are life insurance, homeowners' insurance, and auto insurance. You may also need an umbrella policy as your assets and wealth grow. Health insurance and disability insurance are usually part of your company benefits, which you don't need an agent but should review with your financial advisor.
You can search out brokers and agents in each of those categories and asking friends and family for referrals is always a good strategy. Once you speak with these professionals, make sure you compare similar plans and shop around for pricing and features/services.
ATTORNEY
Many people in their 30s neglect to do proper estate planning because they feel they 'don't have an estate'. Nothing could be further from the truth, especially if kids are involved.
It is essential to talk to an estate planning attorney to draw up the appropriate documents as they vary by state. There are six parts to a proper estate plan.
1. A will or trust.
A will allows you to determine how your property and possessions are distributed at your death. Trusts go further by possibly limiting taxes and legal challenges.
2. Durable power of attorney.
In this document, you assign someone the power to act on your behalf in financial matters.
3. Beneficiary designations.
We all have assets that can pass to our heirs without being in a will. Think of your company 401k plan or a life insurance policy, for instance. You designate beneficiaries in those policies who will get the money when you die. Be sure to review those designations periodically.
4. Letter of Intent.
These documents tell your executor or beneficiary what you want to do with a specific asset.
5. Healthcare power of attorney.
If you become physically incapacitated and can't advocate for yourself, you will want to have a healthcare power of attorney. This is the legal document where you give a specific person the ability to make medical decisions on your behalf. There is another legal document called the HIPAA Authorization Form, which is where you tell your doctors and hospitals the identity of your healthcare proxy. You will want to have this form on file to avoid confusion when and if you are incapacitated.
6. Guardianship designation.
If you have minor children, then appointing a guardian(s) is crucial. The person(s) you chose should share your values, be financially prudent and of course, be willing and able to raise your children. The downside to not doing this could be dramatic, as the court could choose a family member that you would not have chosen.
FINANCIAL ADVISOR
A financial advisor plays the crucial role of connecting you and all your professional service providers. Each of these professionals oversees their specific area of expertise, and your financial advisor helps manage the big picture.
In addition to being your central point of contact, an advisor is responsible for helping you determine your financial and life goals and aligning your financial strategies and investment accounts to help you achieve those goals.
As part of that process, they are your point person who will periodically initiate conversations to determine any changes to your plan or portfolio that need to be made based on changes to your life or the economy/markets. Additionally, they often have established professional relationships with these other professionals, which can help put your mind at ease in determining whom to work with.
