Disclosure: Palash S. Islam is the owner of Synergy Financial Group, LTD. He is also a Board Certified Financial Planner (CFP®). Securities and Advisory Services offered through KMS Financial Services, Inc.
1. What are the steps to take in terms of Financial Planning especially for college students and young professionals?
At the end of the day, the fundamentals are of significant importance. In football, it’s about proper technique in blocking and tackling. In finance it’s all about cash flow and budgeting. Ask yourself whether you know how much income (or loans) are coming into your bank account- and more importantly, where you are spending it. There are many budgeting tools online.
I see many college students taking out loans of $100k or more- yet their starting earnings potential is only $30k or $40k. Mathematically, that does not make sense- so some creative thinking should be used in identifying your career and education.
2. Can you compare/contrast personal finance and investing? What should we be focusing on at a younger age?
Personal finance encompasses all six areas of planning. While in college, I would focus on minimizing debt. Once working, the focus should be on paying off debt and saving money.
My dad incentivized me to save and learn about the market while I was in college. I was earning money working for the basketball team at Washington while also taking classes at Foster School of Business. Whatever money I invested into my Roth IRA, he matched me dollar for dollar. What I would suggest when investing is to just do it automatically. No matter how much you earn, always save a percentage. 10% is a great start.
3. Why is personal finance so important? People our age are not dealing with that much money so what difference does it make?
Google ‘compound interest’. That will answer this question pretty quickly! J Beyond that, in my experience, I’ve found people without debt have more flexibility and freedom to do what they want much more than those with debt. This also includes having the proper insurance while you’re young and are working. For example, if you work for a driving company then you are going to need commercial trucker insurance. Being properly insured can save you thousands of dollars worth of headache in case you get sick!
4. What role is a financial advisor suppose to play?
Depends- there are many different people who are ‘financial advisors’. I’ve seen mortgage brokers, insurance salesmen, investment salesmen and countless others who count themselves as ‘Financial Advisors’.
My suggestion- Make sure they are Board Certified (CFP), make sure they don’t work for a large financial institution where they will be pushing their investment or insurance product, and make sure they always talk about the six area’s of financial planning. If they’re not and they’re not even charging a fee for advice, they’re likely masquerading as a Financial Advisor in hopes of selling you a product.
5. Who should be seeking to have a financial advisor?
This is a tough question. An established firm like Synergy has various income and asset criteria’s. We work with a targeted clientele and are known as specialists in our field.
At the end of the day, I think you should simply get started. There are plenty of places online which can at least get you going. When things get complex (buying a car, house, getting married, kids, etc), then you may look for an Advisor. If you’re a couple looking into your finances, then I suggest looking for a Couples Money Management Coach. The answer is truly different for everyone.
Different people and Advisors have different levels of motivation. Look for someone you can relate to and has similar values. I would look for an advisor with the skillset to be a ‘Financial Coach’ and provide leadership on my finances.
In my experience as an Advisor, I am the first to know if someone is having a career change, baby on the way, buying or selling a business, or even getting married. It’s a privilege to be in that position and that’s why I love what I do!