When Should You Go the DIY Route?

Have you ever wondered, “when does it pay to have a professional do it versus doing it myself?” My fellow planner, Cyrus Purnell, CFP® and I were chatting about our funny home improvement adventures. Then the conversation turned to other areas where sometimes it’s better to go it alone and sometimes to get help. Here’s what he told me:

A couple of weeks ago, I saw an Instagram post of a buddy of mine with his face buried in his hands and a pair of car keys with the hashtag #failmomentoftheday. Apparently, he tried to program a new key for his wife’s car and managed to deprogram both keys. The result was hiring a tow truck to haul the car to the dealership – what he was trying to avoid in the first place.

I spoke with him afterwards and he mentioned he was convinced to go the DIY route after watching YouTube videos. If alcohol is liquid courage, YouTube is definitely digital courage. My own failures after a little digital courage include: various attempts to fix my car and lawnmower, burnt pieces of meat offered up to the grill gods and a Craigslist’s furniture fixer upper which now resides in my attic.

I can now laugh at these DIY disasters. However, sometimes doing it yourself may not be a laughing matter. At what point does the cost of making a rookie mistake outweigh the price of having someone else do it?

When does it make sense to hire a financial advisor to help guide you in decisions related to your nest egg? Should you try to write your own will? Can you find the best insurance and mortgage rates on your own? Here are some thoughts on the value of hiring a professional:

When should you hire a financial advisor?

The value of a financial advisor is found in their ability to work with you to build a portfolio you can tolerate during the inevitable ups and downs of the market. Time in the market generally beats timing the market and a good advisor can help you stay on track in this area. Additionally, once your nest egg is in place, a good financial advisor helps you design a strategy which allows you to take income.

If you want to invest outside of your employer’s retirement plan and retirement is more than 10 years away, DIY investing can make sense. There are a lot of low cost investment options to consider or robo adviser options which can function as an “advisor lite.” If you are simply not comfortable going alone or you are nearing your investment goal, it may be time to interview an investment advisor.

Financial advisor is a generic term so you may want to look for someone reputable and with training specific to your needs. My colleague Erik Carter wrote a blog post that explains exactly what to look for in a trusted adviser: https://www.financialfinesse.com/2012/10/04/can-you-really-trust-your-financial-adviser/. Doing your due diligence is so important my CEO wrote a book about it: What Your Financial Advisor Isn’t Telling You: The Ten Essential Truths You Need to Know About Your Money. That’s a good place to start to see if you really need one.

When do you need a professional to assist with estate planning?

An estate plan can direct where your assets such as a car, home, business, savings, etc., will go in the event of your death. Our own mortality is not the most pleasant topic, but it is one we all deal with it. A well thought out estate plan can make it much easier for those we leave behind.

If you have a blended family or assets across multiple states, professional assistance is especially helpful. If you think a trust might be necessary, you will certainly need to have an attorney to establish one. If you are looking for an attorney that practices estate planning law in your area, a great resource is your local estate planning council: http://www.naepc.org/. Also consider looking into whether your employer offers a legal assistance benefit.

Do you feel your situation does not merit hiring an attorney? Then it can make sense to find a tool to help you put a will in place. Websites like nolo.com offer wills which conform to the laws of your state.

When do you need to hire a tax professional?

If you are filing a 1040EZ or you are not claiming deductions beyond your home and your kids then using tax software will typically do a good job of filing your taxes at a minimal cost. There are cases when a software program may not be the right fit though. If you own a small business, collect income from rental property or if you are settling an estate, hiring a certified public accountant or an enrolled agent can be a very prudent investment.

If you are going to pay someone to help you, hiring a CPA, EA or an attorney would be preferable because they can speak to the IRS on your behalf if you are ever audited. Not only can these professionals help you file your taxes, but they can also give you advice regarding how to run your business to take maximum advantage of the tax rules. The IRS actually offers a site to find qualified professionals in your area: https://www.irs.gov/tax-professionals/choosing-a-tax-professional

When should you work with  a mortgages or insurance broker?

From personal experience, I can suggest the more “plain vanilla” your circumstance is the more likely you can save some time and money online, but the more complex your circumstances are, the better off you may be with a seasoned professional. What is not “plain vanilla?” In the case of life, disability, and long term care insurance, if you have a health condition that could be viewed as negative or uncommon, it may pay to talk to an insurance broker. They can point you to the right companies that will insure you in spite of that condition. In the case of a mortgage, if you have some instances which merit explaining on your credit report, it may pay to have a mortgage broker shop and find the bank or mortgage company that would look more favorably on your situation.

Knowing whether to hire someone or DIY can be tricky. Hopefully this gives you an idea of when to call someone. Otherwise, you may experience your own #failmomentoftheday.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

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