12/13/2013 10:02 am ET Updated Mar 12, 2015

The Advice Financial Planners Only Share With Their Siblings


A little-known loophole about paying off debt, plus more insider guidance from money experts.

By Lynn Andriani

1. Send A Note With Your Extra Loan Payment

It's great if you're able to pay more than the minimum payment on your student loan, says Alexa von Tobel, founder and CEO of the financial-planning site LearnVest. But if von Tobel were talking to her brother, she'd tell him to include a written request with the payment, asking the bank to process the extra amount toward his principal (which reduces the amount of interest he'd have to pay over the life of the loan) and not as an early next payment. If you don't specify, von Tobel explains, the additional money will be applied to the interest -- and you won't be making a dent in your principal.

2. After You Call Your Parents With Big News, Call Your Financial Adviser

Von Tobel recently spent a weekend with extended family, and one of her cousins was talking about her upcoming wedding. The CEO couldn't help but tell her cousin that she and her fiancé needed to consult a financial expert. "For any major event you are going through in your life -- having a baby, buying a home, selling a home, changing jobs, starting a small business -- it is absolutely worth it to make sure you consult a financial expert," von Tobel says. Take buying a home, for example. You may have a lawyer to help you through all the mortgage legalese, but that person is not necessarily looking out for your big-picture financial interest. Spend the extra $300 to $500 to consult with a financial planner to make sure you aren't overborrowing, or making a tax mistake -- like missing out on a cash-saving abatement you might be eligible for (the rules for receiving them are complicated and vary depending on where you live).

3. Be A Really Tough Interviewer

When you are moving to a new state, you know you need to confirm your new adviser is a CFP (certified financial planner) or CFA (chartered financial analyst); and to avoid no-fee CFPs (if they aren't being paid by you, then they're probably earning a commission from insurance companies and mutual-fund firms whenever they sell their products, which is a definite conflict of interest). But you may not know to beware of other "alphabet soup" designations. According to Peggy Cabaniss, president of HC Financial Advisors, who has been an investment adviser for more than 25 years, if a potential adviser tells you, "I'm a CDP," that means they're a certified divorce planner -- which is probably only significant if you're going through a divorce. Compared to brokers and investment advisers, financial planners are the least regulated group of financial professionals, so don't assume that a plethora of letters after a planner's name makes him or her extra qualified to advise you on general issues. Check the NAPFA or FPA websites, which have directories of fee-only financial advisers.

4. Review Your Beneficiaries (And Not Just So They Don't Forget About Their Dear Sis)

Even if you aren't planning on leaving a private island to your family upon your death, you probably have a 401(k), IRA or life insurance policy -- and if you haven't designated beneficiaries, you can quickly lose a chunk of the money. (Probate costs -- which your beneficiaries will incur if you haven't named them on your retirement and bank accounts -- vary, but the average is around $2,000.) According to the Financial Planning Association, a beneficiary trumps a will; so, for instance, if your sister is named in your will but your ex-spouse is the beneficiary on your 401(k), your sis could get your apartment, but your ex will get your retirement funds. Von Tobel knows this isn't something that's at the top of her siblings' lists of things to do, though. Here's one way to make sure it gets done: Set a calendar reminder to review your beneficiaries once a year (New Year's Day is one idea; you're planning for the year ahead and probably just took a mental inventory of who belongs on your naughty and nice lists). The process is actually quite painless; here's how to do it.

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