When should you use a financial planner?

While some experts say a good rule of thumb is to hire an advisor when you can save 20% of your annual income, others recommend getting one when your financial situation gets complicated, such as when you receive an inheritance from one of your parents or want to increase your retirement funds. If your finances are simple, you may be able to take a DIY approach. However, financial planners can offer an objective perspective and bring their expertise to decisions about how you should invest your money, what your financial priorities should be, and what type of insurance coverage and other protections you need. A financial planner can be especially useful when you're faced with a change in your life (for example, a marriage, divorce, or inheritance).

But as you turn 30 and 40, you'll have a clearer idea of what your ideal retirement will look like, and figuring out how to achieve that can be a little tricky. Financial planners are experts in retirement planning; they can assess how much you should save and where you should invest it to get on track for the retirement of your dreams. Financial planners can help with things that can be complicated, such as finding health insurance, which is purchased individually when not available through an employer, and saving for retirement without access to a 401 (k) plan. From managing money when income is inconsistent to planning taxes every quarter, a professional can help you come up with a plan.

Often, the accounts and funds in which planners invest their money also have costs. These costs could include trading costs and expense ratios. Ask about account charges and, of course, the management fee the financial planner will charge. The management fee alone is usually 1 to 2% of the value of your portfolio, reports Tanza Loudenback, from Insider.

Working with a financial advisor can be extremely beneficial, but not everyone needs one on their side. Some people, under certain circumstances, can get by managing their own investments and making their own financial plans. A professional can tell you which accounts you should combine or keep separate and create a coherent financial plan that meets both of your needs. Depending on your area of expertise, financial counselors can help you with everything from developing a comprehensive retirement savings plan with an attached schedule to simply answering a question about comprehensive life insurance.

Since the term is relatively broad and encompasses different types of financial professionals, it's important to remember that not all financial advisors care about your interests. There are several online planning services that combine computer-driven portfolio management with access to financial planners who live and breathe. Online planning services like this one usually charge more than a robo-advisor, but less than a traditional financial planner. Generally speaking, the more complex your financial situation, the more likely you are to benefit from a financial planner.

You can start by finding out if your employer offers financial planning services as an employee benefit. With an online planning service, you may be able to meet with your specialized financial planner before deciding to enroll. Money can buy you a quality plan that can be drawn up in a few hours and that will last you 20 years, with only a minimal need for a financial check with the planner from time to time. This plan can address your retirement prospects, your insurance needs, your investment portfolio, and other aspects of your financial life.

In many cases, you'll have a specialized financial planner and a comprehensive financial plan, but you'll meet with that advisor by phone or video conference instead of in person. In the context of financial planning, this means that the advisor cannot direct you towards investments that are costly (through expense ratios and sales charges) just because they are more profitable for the advisor (as a result of the commissions he earns). At some point, everyone needs to develop a long-term financial plan that includes considerations for retirement, paying for housing, funding their children's college education (if they have them), estate planning, and a retirement timeline. Usually, that means evaluating your financial situation, understanding what you want your money to do for you (both now and in the future), and helping to create a plan to achieve that.

Financial advisor (or financial consultant) is a broad term that encompasses many different professionals who help people with their money. . .