Do I Need a Financial Planner?

Many Americans today are unprepared for a financial disruption and would have trouble covering emergency expenses, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2014. It’s not just our emergency funds that are deficient, either. Only 13 percent of respondents who aren’t retired have given “a lot” of thought to retirement planning, while a little more than a third of workers reported that their spending equaled their income — with one in five spending more than they make.

In fact, four out of five Americans will fail a basic test on how to make retirement savings last, according to 2014 Retirement Income Certified Professional survey from the American College of Financial Services. Even more troubling, almost three quarters of survey respondents didn’t have a written retirement plan in place.

Why is this troubling? Life happens anyway, with or without a plan. People unexpectedly lose jobs. Kids become college-aged seemingly overnight. The roof inevitably springs a leak. For those without the financial know-how or the interest in learning the do-it-yourself financial ropes, there’s a lot to be gained by working with a financial planner, particularly one who has already gained his or her stripes within the industry.

Not all financial planners are created equal. “For the uninformed searching for an advisor, seeking a financial planner with a CFP is a great litmus test,” says Daniel Zajac, a Certified Financial Planner (CFP) with Simone Zajac Wealth Management in Exton, Pa. “You can be assured they have at least three years under their belt and have passed a comprehensive exam with a pass rate that hovers around 50 percent,” he adds. According to the CFP Board, only 20 percent of financial advisors earn the CFP designation.

Do you need to work with a certified financial planner? If you’re one of the many Americans without a written financial plan, the answer may be yes. Read on to find out when and how a financial planner can help build a well-thought-out financial plan. Then you can decide if working with one is in your best interest.

Read: 31 Ways Financial Planners Can Make You Richer

Why Work With a Financial Planner?

Contrary to popular belief, financial planners aren’t just for the rich. “Anyone who has questions about their financial fitness can benefit from working with a CFP,” says Jamie Ebersole of Ebersole Financial in Wellesley Hills, Mass. “CFPs come in all shape and sizes, and most have flexible fee plans to accommodate client needs from a one-off portfolio review to a comprehensive plan. CFPs are a great resource and can be helpful in getting your budget in shape, understanding your insurance needs and building a nest egg for retirement.”

Not sure if you’d benefit from working with a financial planner? According to U.S. News & World Report, you may need an advisor if you don’t know if you’re saving enough money, don’t understand the fee structure of your investments, don’t have a strategy for handling market swings or don’t have a legacy plan in place. Why else might you want to work with a financial planner?

It’s Hard to Make a Financial Plan

You’ve likely heard the adage that failing to plan is planning to fail. When it comes to money, those words can be devastatingly true. In the past 30 years there has been a dramatic shift in how retirement plans are funded. Long gone are the days when employers actively participated in employee retirement planning. Today’s workers need to learn to take charge of their own assets and build a plan for themselves. The problem is that many of us are falling down on the job.

The self-motivated don’t necessarily need a financial planner to create a financial plan (books and other research can can teach you a lot of what you need to know) but many of us don’t have the time, don’t make the time or simply don’t have the interest.

“In most situations, CFPs can help the client think through the issues involved, develop a plan and seek help from other required experts as needed,” says Ebersole. “A large part of this process is spent identifying client goals and making recommendations as to how best to implement a plan that can help them reach (or scale back) their goals.”

“The CFP will also work closely with the client to develop a timetable and responsibilities list so that the agreed-upon plan is executed upon,” he adds. “In the end, it is up to the client to agree to and implement the plan, but having a financial coach in your corner can make a big difference in terms of follow-through.”

If you think you can benefit from having a financial coach in your corner, then a CFP may be for you. In the long run, failing to plan can be much more costly than the fees you could pay to get help from a professional.

Related: How to Choose an Affordable Financial Planner

Financial Situations Change – Often Unexpectedly

It can be difficult to handle expected financial changes like when the kids go to college or when transitioning to retirement. When unexpected challenges get expensive, it can be even harder. Are you prepared for the following?

Marriage

Joint bank accounts, credit cards, college planning for the future family are just a few of the new challenges that new marrieds face. There are also the emotional challenges of getting on the same financial page and learning to set goals together. Not all couples are effective money communicators. Adding a financial professional to the mix can help a new couple get on the right track financially so they can start building toward future goals.

Windfalls

You’ve heard of the woman who gambled away $5.4 million in lottery winnings? How about the rapper who went from a net worth of $33 million to filing for bankruptcy? Even for the extremely wealthy, it can be almost impossible to manage a large influx of money without a financial plan.

“When it comes to unexpected windfalls, it’s important for the recipient to avoid jumping into large decisions that can’t be easily undone,” says Zajac. “A big job of a CFP is to encourage a thorough discussion of the whys and why nots of how to spend (or save) the windfall.”

Having Children

The average cost of raising a child born in 2013 to age 18 in the U.S. is almost a quarter of a million dollars. And that’s before college is figured in. Having a financial planner on board can help new parents figure out how to plan for the costs that come along with that new bundle of joy.

Selling a Family Business

For many small business owners, the exit strategy involves one or more partners or members of the family, either directly or indirectly. “Passing of family businesses is a big opportunity for CFPs to differentiate,” says Zajac. “Often, it’s a matter of creating liquidity for the surviving shareholders. A CFP can help address equality for children not in the family business, or converse about role responsibility for the surviving shareholders. CFPs might also help in planning for a liquidity event while the owners are still alive,” he adds.

Retirement

For many people, planning for retirement requires so much more than just plugging income numbers into an online calculator. “Lifestyles change over time,” says Brent Leavitt of Nevada Benefits in Las Vegas. “People pay off debts, get into even more debt, have children, pets, parents cause financial strain, etc. There is no true way to account for those. The financial planner is there to meet with you regularly and adjust the plan accordingly.”

Divorce

Divorce can be both emotionally wrenching and financially draining. “Most clients don’t have a clue what to do with their assets, health care, or even future plans when something like this happens,” says Leavitt.

The hardest time to make good decisions can be when you’re upset or angry. “The goal of the planner is to help re-evaluate the situation and bring them back down to what is going on and bring back hopes and dreams and help make them possible again,” he adds.

Medical Expenses

According to a 2014 survey for Fidelity Investments, the average 65-year old couple entering retirement will need $220,000 to cover the cost of health care during retirement. That number doesn’t include long-term care. “Long term care planning and expenditures can be crippling on a family,” says Leavitt. “The planner’s goal is to help protect assets and make sure there is enough money to get through this time.”

Job Loss

The best way to prepare for a job loss is to start saving before you lose your job. Ultimately, this is what an emergency savings account is for. “A good financial plan will adequately address income needs in the event of a job loss,” says Zajac. After a loss has occurred, he adds, “a CFP can also help with issues such as 401k rollovers and lost group benefits that need to be restructured.”

Related: Where to Find the Best Free Personal Financial Planning Software

Other Ways a Financial Planner Can Help

Planning for College

A family should prepare for the costs associated with college early and often. Zajac suggests a monthly, automatic contribution to a 529 plan. “It doesn’t matter if you are not sure if you kid is going to college or not,” he says. “You need to prepare as if they are going, because what if they do, and you haven’t prepared!”

Rolling Over a Retirement Plan

A financial planner can help roll over 401(k) or other retirement accounts into a new IRA or a new employer’s retirement plan. A CFP can discuss the benefits of each decision and help the client with any necessary paperwork.

Maximizing Tax Strategies

A CFP isn’t a Certified Public Accountant (CPA) and won’t do your taxes. Even so, many CFPs are well-versed in strategies that can help minimize the impact of tax consequences in a portfolio. “CFPs are trained to know about specific tax write-offs, deferrals and other strategies that can help them be able to minimize their tax burdens and be prepared for unexpected tax consequences,” says Leavitt.

Zajac adds that a good CFP can help a client decide which retirement strategies to choose (for example, a Roth or traditional IRA), when to exercise stock options and when to take advantage of employer stock net unrealized appreciation.

Whether to work with a CFP or go it alone has a lot to do with your individual knowledge, how much time you want to invest in learning, and your ability to set and monitor financial goals. A CFP can offer a great deal of guidance and help with a lot of tricky financial situations that many of us don’t face often. Whatever you decide, take action and start planning your financial future today. Forgetting to plan is the worst plan of all.

This article originally appeared on GOBankingRates.com: Do I Need a Financial Planner?

This article by Alaina Tweddale first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.