Expert Interview with Jim Blankenship on Financial Planning for Mint

Jim Blankenship is a Certified Financial Planner and a tax expert, but more importantly, he's a tireless advocate for better financial health and getting the most out of your money on his blog, Getting Your Financial Ducks in a Row. Jim was kind enough to speak to us about how to, well, get your financial ducks in a row.

Who should hire a financial planner, and why?

Naturally, anyone looking to organize and become more effective with his or her financial dealings should hire a financial planner; this is the most common sort of client that we see. Often this occurs sometime shortly before retirement age, which many times is too late to make any significant changes to improve the overall picture. Engaging a financial advisor for a comprehensive view of your financial situation should be done as early as possible, in order to ensure that even the small things that you're doing today don't have long-term adverse impacts.

Any time an individual is facing a financial decision that they don't fully understand, it can be helpful to call upon a financial planner for assistance. This includes seemingly small decisions like reviewing auto insurance or how to pay down debt - but it really pays off for the bigger decisions such as how to allocate my 401(k) or can we afford this house? This is because a financial planner is in the unique position of understanding all of the impacts of each of these decisions on your overall financial life. Hourly financial advice can address these kinds of decisions in a cost-effective manner that can give you peace of mind moving forward with the decision process.

What are some common misconceptions about personal finance you see?

The first is that it's all about investing and the stock market. Investments are a part of what we look at, but in a comprehensive overview, we'll look at things like your spending habits, use of personal credit, insurance coverage, income tax returns, Social Security projections and estate planning information, contexted with your investing activities as well. It's far from "all about investing"; all of these components work together, and often one decision impacts many others.

Another is that a financial advisor will judge your situation. While the advisor may point out things that you can be doing differently and make recommendations to improve, no one is judging you. Financial advisors are human beings as well - we have or have had spending problems; we make mistakes in personal investment choices, and the like - none of us is perfect, and we're certainly not in a position to judge another. What we bring to the table is knowledge of what works and experience (quite often personal experience) in approaching financial problems effectively.

Probably the most egregious misconception is that you have to have a lot of money to engage a financial advisor. While the cost of the advice could be a significant portion of the money that you have if you don't have much to start with, the advice itself can have a huge return on investment. If it costs $1,000 today to receive sound advice on topics that could in the future save you thousands in taxes or return you many thousands more in retirement income, that seems like a pretty good return to me.

What are some life events a financial planner should be used for?

Definitely retirement, as you might guess, but also any major change in life. For example, starting a new job brings up questions regarding health coverage, income taxes and retirement saving; with a new baby, there are many financial things to consider like planning for college, life insurance and estate planning issues; new marriages require reviewing present account beneficiaries, life insurance, co-mingling budgets and financial perspectives; death of a spouse...the list goes on.

What advice do you have for a new investor? Where should they start? How much research should they do?

Two things that a new investor can do to vastly improve his or her odds of success are to 1) limit expenses where possible, by choosing low-cost alternatives like no-load mutual funds or exchange-traded funds when allocating investments; and 2) educate him or herself about the investment choices being made, the types of accounts available to you, and gain at least a limited understanding of the whole process. Time and money spent on these two items can pay off in huge returns over long periods of time.

In the case of both items, this should be a life-long process - always eyeing the costs of your investments and always learning about how it all works. No one says you have to become an investment genius, but maintaining an understanding of the process of investing is an important part of your success.

What's the best piece of financial advice you were ever given?

There have been many pieces of excellent advice over the years - perhaps one of the best would be one of the first. When I was 17 years old and all excited about the possibility of buying my own car, my dad gave me a bit of advice that has always stuck with me:

Keep in mind, it's transportation first and foremost. It won't earn you money, it won't make you happy - in fact, it will cost you money and likely frustrate you. The key is to remember that it should do its job and do it well, for the money you spend on it.

I've applied that to many things over the years, and it has definitely helped keep me to a good perspective and make fewer mistakes.

What trends in finance should we be keeping an eye on?

Continue to be alert for hucksters of all types who will promise wonderful things in exchange for your dollars. This is a trend that's been going on as long as time.

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