• Kale

FIRE: When you ACTUALLY need to pay for a financial planner (Part 1)

Save yourself thousands and get the same result.

For those who do not want to read this entire thing -

If you are in your 20's/30's, have no dependents, are not married, plan to work until the day you die, and have a manageable amount of debt - STOP READING AND CARRY ON.

Thanks to our friends at Smartasset, we know that a financial planner costs anywhere from $500 to $10,000 per year.

Typical fixed costs are $3,000 with an hourly rate of around $400/hour (on top of the fixed fee). Or, some may pull an AUM pricing model - which means that you will pay them 1% of your total assets managed in fees every year ($100k = $1,000 fee/year).

That is fucking crazy, for the following reasons:

  1. Up until you meet certain criteria, you do not professional advisory services at all

  2. Even when you reach a certain point, you can pretty easily DIY most components that these advisors are doing and outsource the parts that they aren't doing (estate, legal, trust, accountant)

  3. Between FinTechs & Personal Finance/FI forums, all the info and tools you need are readily available and very cheap (relative to those crazy numbers above)

With that said, I'm actually going to make the surprising statement -

You never need a financial planner.

You need a solid savings + brokerage account, a fee-based estate expert, a lawyer to set up your trust(s) (if needed), and an accountant to help you with tax planning strategies (down the line).

I'll list include specific recommendations in this article but I always recommend "shopping" for the right fit.

Pre-kids & Marriage Life

Sweet bliss.

Your biggest priorities at this point should be figuring out how to set up auto-save/invest with the right bank/brokerage and mapping out your basic financial goals.

I know it sounds too simplistic - but that's it.

Here are your MUST DO action items for this stage:

I. Open a brokerage account at either Vanguard or Robinhood

Vanguard has the ultimate total market index fund (VTSAX) if you meet the minimum requirements and Robinhood has ETFs for total market funds (+ is simple to use).

Once open, set up a direct deposit into this account on a monthly basis. Typically you can do this through your employer or your bank.

All money at this stage in life should be dumped into a low-fee total market index fund (ETF or mutual fund - either work).


DO NOT put this off you fuck.

II. Open a Froogal account for savings

I helped build Froogal but only recommend it because it is by far the best place to save.

Froogal is the savings account you have always wanted.

Froogal is completely free now (even to launch a club) and allows you to obtain the highest savings rates at all times.

You can think of Froogal as the anti-bank that actually helps you earn more rather than looks for ways to charge you fees/pay you less.

Froogal also has financial goal planning built-in so you can delete the excel spreadsheet.

Once you launch your Froogal club, add any savings you may be keeping at a different bank & set up a monthly transfer.


III. Plan your 1-5 year financial goals

You can do this the old fashioned way (pen & paper), the Excel way, or the Froogal way.

All that matters is that you DO IT.

Here's a list of typical 5-year financial goals for 20/30-somethings.

  1. Upgrade that '98 Corolla (to an '04)

  2. Down payment for 1st home purchase

  3. Wedding

  4. Honeymoon

  5. Emergency Fund (always)

  6. Annual vacation

I'm sure you've thought about saving for all of the above at some point but likely have zero idea what they will likely actually cost.

Lucky for you, it's 2020.

Using our friend Google, detail out the ACTUAL costs of each of these goals.

For example, use Kelly Blue Book to determine the actual cost of an '04 Corolla + figure out how much insurance will cost + how much it will cost for new registration + how much you should likely have saved for maintenance during the first 6-12 months.

For another example, work through the costs of obtaining a wedding venue + paying for a dress + paying for food + paying for an open bar + paying for the rings + paying for the million other things that come with getting married. You are likely to soon realize you need to start saving A LOT.

Regardless, the key is to figure out the actual expected costs and not estimates.

Once you have this completed, you can start saving & investing based on each specific timeline.

Not buying a home for at least 5 years? Maybe consider investing for the first 2 and then moving the money to a savings account afterward.

The point is, you can't win the battle that is money unless you have a clear plan. With these first 3 tasks, you have a plan + you have the tools needed to give you the best chance of victory.

Kids & Married Life

Continued in part 2.

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