Choosing a Financial Professional

Managing money is not an innate skill and often it makes sense to turn to expert help. Whether you’re looking for help with your taxes, choosing investments for your retirement savings, or managing multiple saving goals, financial professionals can help you explore alternatives and strategies to best manage your finances.

However, choosing a financial professional is a scary proposition for many people. It can be hard to decide who you want to trust with your money and your future dreams. Unfortunately, government regulations do not protect the consumer very well in this area. Anyone can call themselves a financial adviser. Taking a little time to investigate financial professionals before you begin working with someone will allow you to make an informed decision.

First, think about what services do you need. This will help you identify a financial professional who has experience and education that matches your need. For example, if you are 24-years-old and are looking for investment advice, then you may not want to choose someone who specializes in estate planning for 80-year-olds. Or, if you need advice about filing taxes for your small business, then you need someone with tax expertise.

Are you puzzled by all the initials following financial professionals’ names? University of Illinois Extension’s website, Choosing a Financial Professional, includes a Guide to Financial Credentials. This in-depth table lists many financial credentials and information such as the education required to receive the credential. You may want to start your research into financial professionals here.

At this website there are also links to several online searches that can connect you with financial professionals in your community. You may also want to ask friends or other acquaintances for suggestions of financial professionals.

However, no matter who refers you to a financial professional, take the time to interview two or three people to find one that is a good match for you. Ask specific questions such as how much and what type of continuing education does the person you’re interviewing engage in on a regular basis? The financial world, and related laws and products, change at a rapid pace; continuing education is essential. How is the financial professional paid? Is the financial professional’s income fee-based or commission-based? You have the right to know how much financial services will cost and how they will be calculated. At the Choosing a Financial Professional website you can download a free Interview Guide to help you think of questions to ask.

Even if someone is the perfect match for your Uncle Fred, it doesn’t mean that they are the right financial professional for you. Be sure you’re comfortable asking questions and talking to the financial professional. You want someone who can explain things in a way that makes sense to you.

One last, but important, step: Once you narrow your choices, check the financial professional’s background and references. In Illinois, check a person’s licenses and disciplinary records by calling the Illinois Securities Department, toll-free 1-800-628-7937. If someone is helping you buy or sell investments, you do want to be sure that they are licensed to do so in Illinois.

If you have more questions about choosing a financial professional or other financial matters, please visit our Plan Well, Retire Well blog, or contact us at FinancialWellnessUIE@gmail.com or call (217) 333-7672 for more information.

Written by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension

Staying on Good Terms: Credit & Debt (Recorded Webinar)

According to a 2012 Sallie Mae report, “How America Pays,” 35% of students borrowed education loans to pay for college and, although credit card ownership has decreased recently, 35% of undergraduates have a credit card. Credit is an important financial tool that students need to learn how to manage wisely. Learn how credit card debt can affect you now as well as in the future through this webinar.

University of Illinois Extension, along with the University of Illinois’ Student Money Management Center, hosted the webinar “Staying on Good Terms: Credit & Debt” on October 21, 2014. The FREE webinar focused on understanding credit, comparing costs of credit, and managing debt effectively. Watch it below!

Borrowing badgeThis is a Borrowing Badge eligible program, so make sure to take the quiz after watching to get credit!

“Staying on Good Terms: Credit & Debt” is part of the Get $avvy: Grow Your Green Stuff webinar series.

 

Written by Andrea Pellegrini, University of Illinois USFSCO Student Money Management Center

Spotlight on Library Resources: Spending

CliffsNotes Graduation Debt [electronic resource]: How to Manage Student Loans and Live Your Life by Reyna Gobel

CliffsNotes Graduation Debt: How to Manage Student Loans and Live Your Life is a guidebook for managing a significant debt load after college, yet the author takes a positive approach to personal finance, emphasizing frugality and spending money wisely in order to still live well while paying off debt. It is possible to take vacations and have extra spending money even while repaying loans! The book even ends with sections on Eating Out, Moving into a Nicer Place, and “Earning” a New Car.

The focus of this ebook is not exclusively spending. However, as it does take a positive approach to personal finance and gives serious attention to spending as a part of living your life, this book can be read at least in part as a manual on budgeting and spending wisely. Chapter 5, “Budgeting for Your Lifestyle and Your Loans,” and chapter 9, “Budgeting During Inflation,” contain practical advice about spending and budgeting, including such tips as keeping a financial diary and choosing budgetary cutbacks. The book even provides, in a sense, “financial self-help” throughout by, for example, reminding the reader not to dwell on past financial mistakes but instead problem-solve when mistakes or overspending are discovered.

The ebook is divided up into many small subsections making it easy to read. In typical CliffsNotes-style, the book is effectively a “cheat sheet” for personal finance, making the topic accessible to readers least inclined to seek out resources on personal finance otherwise. The rewards it promises, too, are enough to make this resource enticing to any new grad knee-deep in debt!

Note: this ebook can only be accessed on campus or off campus with your University of Illinois at Urbana-Champaign net ID. If you do not have access to this ebook, please request a print copy through your local public library.

Written by Heidi Johnson, University of Illinois Library

How does the time value of money help young investors?

The time value of money concept is one of the most important factors individuals face when it comes to investing assets. Time value of money is the idea that money available today is worth more than the same amount of money available at a future date, because of interest earning potential.

Let’s say you are offered $100 today, or were given the opportunity to collect $100 one year from now. Would you take the money now, or later? Your best option would be to accept the $100 today, because of interest earning potential and opportunity cost.

Taking the payment today would allow you to invest your money in a savings vehicle like a savings account or money market account. Investing your money allows you to earn interest, meaning the bank is paying you a small percentage for using your deposited funds. Therefore, depositing your money in a savings account will allow your money to grow every year.

Going back to the example, the opportunity cost of choosing to defer a $100 payment today is the interest you could have earned through investing your money. Opportunity cost is a trade-off between what you chose and what you could have had. For instance, if you pay $10 for a movie ticket, your cost of attending the movie is not only the $10, but also the time and value of what you could have enjoyed doing instead of going to the movie. That being said, when choosing to spend or save your money, it is important to think about the opportunity cost of your decision, making sure that the benefits outweigh the costs.

The main idea of the time value of money is that as a young investor, you should start saving as soon as possible! The sooner you invest, the higher your interest earning potential, and thus, the more likely your money will grow over time.

Written by Jessica Wesser, Financial Wellness Peer Educator, University of Illinois Extension

What information should I consider before borrowing a student loan?

Student loans are a common and convenient source of funding used by more than half of the students at the University of Illinois to help pay for their education. Many students do need to borrow and consider this a wise investment in their future. Before borrowing a student loan, consider this important information:

  • Borrow only what you need and can reasonably repay.
  • Develop a realistic budget and consider ways to lower your costs.
  • Research the average pay of your chosen field to know if your projected earnings will be enough to repay your student loans.
  • Keep track of your loan debt (principal and any accrued interest) so you will know the amount you will have to repay.
  • Know that repaying your student loan on time can help establish and maintain an excellent credit history.
  • Be aware that student loans are in your name and affect your credit history, so you should know and understand the obligations.
  • Unlike other forms of consumer debt, student loans cannot be discharged through bankruptcy except under extraordinary circumstances.
  • If you fail to make a payment on your student loan for an extended period, your loans may be placed into default.
  • A default on a federal student loan will require payment of additional costs, including collection costs, attorney’s fees, court costs, and additional interest. These costs may substantially increase the amount owed on your student loan.
  • No statutes of limitation apply to the collection of federal student loan debt. This means that your student loan debt may be collected many years, or decades, into the future.
  • The IRS may seize your tax refunds to repay a defaulted federal student loan.
  • Your future wages may be garnished to repay a defaulted federal student loan.
  • Your Social Security benefits may be garnished to repay a defaulted federal student loan.
  • Any disability benefits you receive may be garnished to repay a defaulted federal student loan.
  • A default on a federal student loan may result in the denial or revocation of a professional license, such as a license to practice medicine or law.

Written by Josh Keen, Office of Student Financial Aid