5 Reasons Why You Should Manage Your Own Finances

1. A Financial Advisor is REALLY costly!

I wrote an entire article on how expensive these guys are. Don’t be fooled by 1% or 2% fees on your AUM! They add up to millions over your career. Read it here. It can change your financial life.

2. A financial education rivals a college education in worth.

Personal financial management is not a subject we learn in school. Financial literacy may result in a payoff that rivals that of going to college. In our example, financially literate Jenny is $2 million richer than financially illiterate Jenny by the time she retires. (Compare this to the average $1.7 million payoff associated with attaining a bachelor’s degree!) Jenny could enjoy the extra $2 million that her financial literacy could realistically bring her in her retirement. Or she has the freedom to retire early with the confidence that her money will last the rest of her life.

3. Beyond improving your own life, you can pass your financial knowledge on to your kids.

Doing so would give them more than a leg up– it could pay off bigger than sending them to college (though I still advocate sending them to college).

4. Managing your own finances puts you in the driver’s seat.

When I have conversations with people who don’t manage their own finances and investments, it is always mind-boggling to me how little do they know what is happening to their hard earned money. I do not like the feeling that I am not in control of my own assets, do you?

5. It’s fun to figure out the rules of the game.

Investing your own money becomes incredibly fun and rewarding once you figure out the rules. Knowing how much money you can legally shelter from IRS and how much tax money you can save is a great feeling. Knowing what to invest with your pre-tax money vs post-tax money and how much stocks vs bonds to put in your portfolio and how to rebalance your portfolio are skills you will enjoy to master, especially when you watch your investments grow from your own doing. When the market takes a downturn, it will take discipline to hold your shares and watch your hard earned money evaporate and not to panic. Armed with knowledge of market historical patterns, you will know what the right moves are. And that can be fun, too!

I can think of many other reasons that you should manage your own finances instead of writing a check every once a while to your financial advisor. There is a huge opportunity loss in not managing your own finances and investments. What do you think? Do you have a financial advisor? How much is he/she charging you?

Want to figure out how much you need to retire? Read here.



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