Managing your money may be your own responsibility, but there are some times and tasks that require the attention of an expert. Even if you don't rely on a financial professional to oversee your finances on a regular basis, seeking the advice of an expert can be crucial for navigating certain situations successfully.
On the other hand, many important financial tasks may not require the help of a financial professional, and you can save money by simply handling them yourself. From managing a portfolio to drafting a will, here's a look at what you may be best off doing yourself and when you should turn to a professional.
- By Nancy M. Jackson, special to CNBC.com
"Do-it-yourself companies such as Vanguard, Fidelity, Scottrade, and have done a good job showing that portfolio management can be done without hiring and paying a firm," says Carlos Dias, Jr., founder and managing partner of Excel Tax & Wealth Group in Orlando, Fla.
"Still, most Americans have their investments with management firms. If the professional constantly underperforms against a benchmark such as the S&P 500, then it is best to manage it on your own," he said.
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Many clients can manage one or two accounts such as a Roth IRA and a 401(k), says Marguerita Cheng, CFP, CEO of Blue Ocean Global Wealth in Rockville, Md. As they add more accounts and their lives get more complicated, however, it can be helpful to seek help from a financial advisor.
"Clients can't delegate taking care of their family, working out, coaching soccer, or attending church, but they can delegate portfolio management to ensure they have a trusted partner monitoring their portfolio," Cheng says.
Even if you don't want full-time professional help, your portfolio may benefit from a pair of expert eyes. "If the portfolio is large or complicated, they should see a professional, even if it's just to get a second opinion on what they've done or plan to do," says Marty Durbin, CPA, president and investment advisor representative at Aperture Retirement Designs in Arlington, Texas. "Getting an opinion from an objective professional who is not paid based on what products he or she sells can be a good idea."
If all your income is stated on an employer-provided W-2 form, filing your taxes is fairly straightforward and you can probably handle it yourself, Cheng says. A number of free or almost free tax software programs are available to make filing easier.
However,if you have several sources of income, or if you've had a complicated year with one or more life changes, it may be helpful to work with a tax professional. "Just changing a job may not warrant paying someone to do your taxes," Cheng says.
"However, changing jobs, moving, selling a house, buying a house, getting married and having a baby are all changes. Have a year with more than one of those changes and it may make sense [to get help]."
If you're retired and just have Social Security or pension income, self-filing is also fairly simple. Yet if you have multiple income sources such as a business, dividend and rental income, and depreciation—or if you just want an opinion on how to reduce taxes now or in the future—Dias recommends working with a professional.
If you don't have a will and want to have a say in what happens to your assets in the event of your death, you can easily draft your own will. The process is fairly simple, and can be done by downloading forms from a legal site such as NOLO.com.
However,drafting a will is "only one small piece of the need for estate planning," Aperture's Durbin says.
"Everyone has some basic estate planning needs regardless of how much money they have," he says. "What happens if they become sick, disabled, or incapacitated? The law in some of these areas evolves over time and a professional will be on top of current requirements for your state."
In addition to a basic will, Durbin recommends drafting a living will, a statutory power of attorney, a medical power of attorney, and HIPAA authorization. If you have children who are minors, you may also need the aid of a professional to help identify and document guardianship for your children in the case of your death.
If you're struggling with how much to budget for expenses and savings, though, consider seeking professional advice, Durbin says. "A properly constructed budget should allow a person to minimize debt and set aside money for emergencies and future financial needs such as retirement. An important question is, 'Based on my budget and planned changes, will I have enough to retire and not have to worry about running out of money?'"
Not only will a strong budget help you manage expenses today, but it can help you plan better for the future.
"The value of establishing a budget is to help people understand what their number is," Blue Ocean's Cheng says. "I always tell clients that we need to take care of two people — you today and you in the future. The goal of [budgeting expenses] is to understand how much you need today and help you plan for how much you need in the future."
She added: "For younger clients, a budget or spending plan can help them identify trends and look for ways to reduce expenses to save and invest for the future."
Many homeowners and homebuyers successfully buy and sell real estate on their own, especially with the help of an increasing number of websites focused on real estate for sale by owner. If you sell your house without the help of a professional Realtor, you won't have to pay commission. Still, you will have to put more of your time and effort into the purchase or sale.
The National Association of Realtors also argues that those who use agents often get more for their homes. According to their data, the median sale price for the 88 percent of sellers who worked with an agent in 2012 was $215,000, versus a median sale price of $174,900 for the 9 percent of sellers who didn't use an agent. Real estate professionals can also help both buyers and sellers navigate the complicated contract and negotiation process, as well as regulations, laws and practices.
Bottom line: Doing it yourself will require more time and research, but it can save you money. If you go with a Realtor, make sure it's someone who's familiar with your neighborhood and has a strong track record and references.
If you want or need more insurance than is available through your employer, you can purchase policies online or by calling an insurance agent. But talking with a financial advisor can be a wise step when making insurance choices.
"As life events change, understanding your protection needs is important," said Rich Linton, president of large institutional and individual markets at Voya Financial. "Working with an advisor allows you to assess those needs and tie back to your financial plan."