(NYTIMES) – With financial adulthood comes a series of firsts – apartments, loan payments and other complex decisions, all made while rent is high and starting pay cheques are low.
So, what if that young adult heading out into the working world could confide in a trained, trusted guide, someone who might share the magic of compound interest or illustrate how setting aside just a little money at age 22 instead of 32 can translate into hundreds of thousands of dollars later?
If you are close to someone entering this new phase – whether from high school, graduate school or somewhere in between – providing the gift of professional advice may be one of the most efficient ways to set him or her on the right path.
Financial know-how comes in many forms, so highly motivated individuals can figure out how to navigate on their own.
But there are plenty of snake oil salespeople – and TikTok videos and crypto-hyping friends do not always provide sound advice.
Laying out a few hundred dollars for guidance can help prevent costlier mistakes, while providing the support to arrive at financial decisions more thoughtfully, even if it is not the most favourable option on the spreadsheet.
“Often, I end up creating plans where people don’t necessarily do the mathematically optimal thing, but it’s right for them,” said financial planner Cristina Guglielmetti.
The good news: Financial advice has become more affordable in recent years.
Here’s a look at what a new graduate is likely to explore during a session and how to find the right kind of professional.
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 get somebody completely fresh, I would have them look at what they want their life to look like in five or 10 years and figure out what that will take from a financial perspective,” said Ms Anna N’Jie-Konte, a financial planner in Maryland.
Then, after money is set aside to cover essentials such as rent and food, she will help shape reasonable savings goals. Anything left over goes towards discretionary spending.
Getting the formula just right may take a little adjusting, but it sets up finances so a new graduate does not have to think too hard about budgeting – essentially spending whatever is left over.
Financial planners can also offer new graduates advice on setting up a retirement account and choosing investment options, deciding what to do if they are offered stock compensation, and automating as much of their financial life as possible.
Find the right fit
Financial advisers have long had a reputation for being older, male and focused on higher-net-worth families.
Mr Kevin Mahoney, a financial planner in Washington who focuses on millennials, said: “That is no longer the case.”
Searching for a peer – or someone who can better relate to their situation – is a good idea, giving graduates access to someone who meshes with their background and needs.
But personality matters, too. When reaching out to potential advisers, take note of the types of questions they ask and in what order.
Some pros may be more focused on numbers, spreadsheets and tactics, which may be fine for certain graduates.
But others may benefit from an adviser who first focuses on the individual and is receptive to the emotional aspects of money.
Fees
A younger adult is unlikely to need more than one or two meetings – perhaps one in depth and one shorter.
You can expect to pay anywhere from US$200 (S$270) to US$450 an hour, or perhaps a flat US$500 for a package. Don’t be shy about asking for a payment plan – or paying in a couple of instalments, experts said.