As I’ve mentioned before, I am slowly working my way through baby steps 4 and 6 of the Dave Ramsey Plan. This post is about baby step 4 – investing 15% of your household income for retirement, specifically a roth IRA.
I know absolutely nothing about investing so I decided to use one of Dave Ramsey’s ELP’s (endorsed local providers). Dave claims that his ELP’s have the “heart of a teacher and provide top notch service.” Dave’s never steered me wrong so I clicked on the investing and promptly filled out the form. Within seconds I got an email with my local ELP’s contact information and the next day I received a phone call to schedule an appointment. The receptionist ask that I bring any financial data I would like for him to look over (I brought my last 401k statement) and any questions I may have.
First thing first, do your research on the advisor firm. Go to the FINRA website, type in the individual or firm name and it will list any complaints they have had. You can view a detailed report and it’s absolutely free. One of the advisors had a few complaints against him which worried me but I decided to go anyway. This was after all a free consultation with free advice. I’m on the Dave Ramsey plan, I can’t afford to pass up on Free!!
How does an advisor get paid? This was the #1 question on my list. Advisors are all different but this one gets paid up front and his commission is taken out of my investment. I did not like this one bit and would have preferred to do business with a fee only advisor who gets paid on an hourly rate. This would be a plus for me because my cost would be less and I will have more money working for me.
My future potential advisor asked me about my financial situation: What do I do for a living? How much debt do I have? How long do I plan on living in my home? What’s my salary? How much is in my 401(k)? How much do I have in savings? These are very personal questions but if you listen to the Dave Ramsey show these are the exact same questions he typically asks his callers.
His advice to me was this . . . go open my own IRA account and invest in a aggressive mutual fund. He said if I were to invest with him he would basically take my money, invest in an aggressive mutual fund and leave it there. Should the market turn around and go south, he would not be calling me to tell me I need to to sell. He would just leave it alone and wait for the market to turn back around. This is a long term investment and I have plenty of time before I retire (I’m 30). Should I have been older then his advice would have been the opposite, hire an advisor and let them do the investing for you. I really appreciated his honesty on this, he easily could have taken advantage of the situation and told me to invest with him because I would loose all my money.
I agreed and decided I am going to try the investing thing on my own. I asked him when would an appropriate time to hire a financial advisor. His response: when you leave your current employer (to roll over your 401(k) into the roth IRA) or when things get complicated and you no longer feel like doing your own investing. Because of my background in accounting I feel like I should be more than capable of opening my own IRA and investing in said mutual funds.
Another tip he gave me was to invest in $1,000(s), this will keep the ‘books’ clean should you ever get audited. Also this will make the tracking of gains and losses on your investments easier to see.
All in all I had a great experience and was very happy with the financial advisor I met. He was very honest and extremely helpful, he put my mind at ease.
My next step . . . visit T.Rowe Price to open my IRA!!
Disclaimer: ELP logo is not mine, this is from Dave Ramsey’s website.