A certified financial planner is a person who has learned and passed all the necessary examinations on all things money. A certified financial planner can’t act professionally as a CFP without a minimum of 3 years financial work experience, and satisfying all statutory licensing demands. If you are thinking of engaging a certified financial planner be sure they have the CFP mark and qualifications.
The first thing a certified financial planner will help you do is to question all of your short-term expenses over the coming year, month by month. They will help you list out all the big payout points such as buying a new car, putting a child college or taking that longed for vacation.
The next thing a certified financial planner will help you to do is to make sure that you have the right amount of money at the right time for those big occasional expenses on top of the lower level everyday expenses, like utility bills, groceries and car maintenance. Possibly in a money market or a savings account or some other form that is not going to be undermined by the ups and downs of the stock market.
A certified financial planner will bring knowledge of all of the deals on savings accounts and which are the safest investment vehicles. They will no doubt explain that there is always a trade off between liquidity (ease of access) and interest rate returns. Especially in these days of very low interest rates, aimed at boosting spending in the economy as a whole, savings barely outstrip inflation.
For a possibly better interest rate, your CFP might advise a money market account. This is an alternate type of savings account that usually requires a higher minimum balance. There may also be limits to the number of withdrawals you can make each month from a money market account.
A certified financial planner will guide you in the best way to earn returns on your ‘rainy day’ money. This is your money that is used in case sudden unpredictable need and should be held in a similar liquid account. So that when it starts raining hard, say with a lay off or serious illness you will have your expenses covered for up to six months worth.
A certified financial planner will use his or her financial knowledge to help you look into the future and anticipate those infrequent large lifestyle expenses. The biggest one of all being retirement of course. Everybody needs to be making savings provision for these times and changes. A proportion of your income must be in short-term investments, such as certificates of deposit or bonds, which are not at risk.