The Downsides of a DIY Financial Plan

Why You Should Think Twice Before Tackling Your Finances on Your Own

Are you currently following a DIY financial plan? Popular platforms like Pinterest and HGTV provide us with constant messages about how practical, cost-efficient, and easy “DIY” projects can be. In fact, many people first consider tackling a project themselves before ever considering hiring a professional. And while certain projects lend themselves to a DIY spirit, such as refinishing a thrifted dresser or painting your living room, taking the DIY route may not be the best option for your financial security.

If you’ve taken up a DIY approach to your financial planning thus far, you may want to reconsider your strategy. Below are several factors to consider before deciding to forgo working with a professional financial advisor.

Successful financial planning requires a certain set of tools.

Just like contractors have trucks full of the specialty tools required to carry out a project, so too do financial advisors. Typically, financial planning and investment management requires a wide variety of software and information that’s not readily available to the average consumer. Sure, there are trading platforms such as Robinhood that offer investment advising help, but many low-cost investment platforms offer only a smattering of investments. A Registered Investment Advisor (RIA), on the other hand, can utilize the entirety of the investment universe to build you a portfolio – oftentimes with more favorable expense ratios and limited transaction costs, too.

A DIY endeavor can be incredibly costly.

While you do have to pay for professional financial services, chances are you’ll be paying less by hiring a professional than you would be spending on the tools you need to properly plan your finances. Generally, the required software packages for financial planning, analytics, trading, and charting will end up costing you around $1,000 a month – and that’s not factoring in transaction and account fees. Not to mention, the chances are high that you’ll be learning as you go, meaning you could be losing money as you make mistakes.

Planning for the future is time consuming.

Anyone who’s ever taken the time to put together a piece of IKEA furniture knows that the first time takes the longest, until you get the hang of what you’re doing and are able to fly through the process faster as you learn. That’s because when you do something repetitively, you ultimately end up improving the speed and accuracy with which you do it. The same can be said with financial planning tasks. A professional will know what to look for when it comes to portfolio rebalancing or stock positions, giving them the time needed to take advantage of any opportunities in the markets. If you’re unsure of what to look for, you may waste time learning what to do rather than being able to take action.

Additionally, the markets are most active during the standard workday when you’re most likely at your busiest. In the twenty-first century, markets operate differently due to high-frequency and algorithmic trading, creating “flash-crashes” and periods of tremendous volatility. If you’re unavailable during times like this, you could find yourself exposed when you don’t want to be.

Money matters leave no room for error or self-doubt.

When your personal finances rely on a DIY financial plan, you’re putting yourself in an echo chamber of your own thoughts and opinions. There’s no one there to check your strategies or for you to brainstorm with. This makes you vulnerable to risks that could have otherwise been avoided. What’s more, making mistakes with your money or investments could lead to years of time and savings lost. If you’re early in your investing and working journey, you may be able to afford taking on that kind of risk, but the closer you get to retirement, the more precarious your positioning becomes.

You don’t know what you don’t know.

Financial advisors go through years of formal education and on-the-job training to master of the ins and outs of the industry. Simply picking up an educational book or reading a few articles won’t give you the knowledge and experience you need to successfully navigate the complex field of financial management. The financial industry has dozens of advanced degrees, certifications, and licensures for a reason – it’s a complicated industry with incredibly high stakes. Especially in the aftermath of COVID-19, it’s become clearer than ever that we can never fully predict when economic downturns and market volatility are going to happen. Having an advisor in your corner who can help you navigate the complex landscape of financial planning can help you avoid any missteps that will put you behind the eight ball.

Are You Rethinking Your DIY Financial Plan?

Having a DIY spirit isn’t a bad thing. In fact, it can foster your creativity, provide an opportunity to learn a new skill, and save money. However, in some things, partnering with a professional you can trust may be the wiser and safer choice. Financial planning is one of those things. Having a financial advisor at your side through all phases of your financial journey can give you the peace of mind that your DIY financial plan isn’t detrimental to your finances, while often saving you time and money in the long run, too.

At Arbor Capital, we understand that you’ve worked hard to build your wealth and remain committed to helping you take it as far as possible. Our team is dedicated to collaborating with you to build a financial plan that will help you realize your life’s ambitions so that you can stay focused on your future while we stay focused on you. Contact us today to start a conversation about how we can help you build a financial plan that meets you where you are.

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