When I started the Certified Financial Planner training program, I believed a reasonably intelligent woman could handle her own finances without hiring help.
By the end of the program, I'd hired a tax pro and an insurance agent. Within a few years, I added an estate planning attorney to the mix. Most recently, I hired a fee-only CFP to help whip our investment portfolio into shape. In short, the more I know, the more I realize I don't know.
Not everyone has the luxury of being able to afford financial advice. But in many cases, hiring help can be a smart investment. Here's a guide to when you should find a pro, and when you can do-it-yourself.
Credit repair: DIY
Credit repair scams are a continual headache for the Federal Trade Commission, which warns people not to pay any firm upfront or engage any company that promises to create a new identity for you (that's fraud, btw). Legitimate credit repair companies exist, but they can't do anything for you that you can't do for yourself.
The FTC has good information on its site about how to do your own credit repair. If you're having problems managing your money or dealing with debt, consider contacting a reputable credit counselor. You can visit the National Foundation for Credit Counseling or check out the U.S. Department of Justice's list of approved counselors.
Taxes: Hire a Pro
If your only income comes from an employer and you don't itemize your deductions, then you're probably fine using tax software to prepare your returns. Once your finances get more complicated, though, you'd be smart to consult a professional. Tax law is complicated and changes constantly; it's the pro's job to stay on top of it. A good tax person can also show you the best ways to minimize your bill.
Consider hiring an enrolled agent, a lesser-known type of tax pro. Enrolled agents are a big step up from storefront tax preparers, but they tend to charge less than CPAs. Like CPAs, enrolled agents are qualified to represent you in front of the IRS in case you're audited. You can get referrals from the National Association of Enrolled Agents.
Consider a CPA, though, if you own your own business, trade your investments frequently or own rental or commercial real estate. You can get referrals from the American Institute of Certified Public Accountants.
Most financial advisors aren't required to put their clients’ interests ahead of their own. They can legally steer you into a mediocre or high-fee investments because they'll earn higher commissions.
As long as that's the case, you're better off DIYing your investments by choosing low-cost index funds that mimic the market, rather than trying to beat it (which few advisors consistently do, by the way). Discount brokerages and retirement account providers often offer free asset allocation worksheets or calculators so you can determine your investment mix. Or you can use prepackaged options: so-called "lifestyle" or "target date" funds that automatically take care of investment selection, asset allocation and rebalancing.
As your investments grow, you may decide to do what I did: Hire someone to help you coordinate your asset allocation across different accounts and give you a second opinion about whether your retirement plans are on track. You can find fee-only planners at Garrett Planning Network and the National Association of Personal Financial Advisors. These advisors, along with those represented by the larger Financial Planning Association, promise to put your interests ahead of their own.