You know you need to start saving. Your toddler will one day come to you with an acceptance letter from Dartmouth. You need a car. And retirement looms.
We may know we need to save, but those of us who don't have financial assets well into the six figures probably don't have a financial planner helping us make our savings and investment decisions.
Never fear! At virtually every stage in the financial planning process, a free or inexpensive online financial-planning service can help put you on the track to financial success.
Not that everyone's accessing them. A scant 44% of recent or soon-to-be retirees with less than $100,000 in assets have financial plans, according to a recent report from the Aite Group. More than 90% of those without plans aren't willing to pay for the services.
But online financial planning services stand to help fill the gap between those who need financial planning services and those who are able to pay for it, says Alois Pirker author of the Aite Group report.
No longer are these products limited to telling you "This is what you need. Good luck," says Pirker. "They really offer you the next steps to improve your situation
and to make consumers feel a lot more comfortable about their situation."
So what are these services and how do you find them? Here's our step by step process to identifying your financial planning needs and finding an online service to help you meet them.
1. Where are you?
Before you can figure out where you're going, it helps to know where you are. Few of us have anyone looking over our shoulder and tracking our expenses.
No matter. We can now do it ourselves with the help of free services like
Become a Mint.com user and you can create an account tracking your various checking, savings, credit card and mutual fund accounts. It then tells you how you're spending your money, and suggests ways to cut back on expenses. Do you qualify for a higher interest checking account? Mint.com will tell you. Didn't realize you were spending so much on takeout food? Now you'll know. And you can create budgets for spending types (like groceries and gas) and compare your spending to other users in your area.
Wesabe and Geezeo provide the same type of service, but with a greater focus on allowing members to give tips to members with similar financial profiles.
2. Where do you want to be?
Presumably, one day you want to retire. But in between now and then, life's likely to be costly: a
, you need an emergency fund, you'd like to own your home.
The newly launched
-- the "R" stands for retirement -- asks you about your current financial situation and your future financial goals, and develops a financial plan to help you achieve them.
The site also puts "real people" in the process. Users can hook up with financial planners, and soon the site will match users who have accomplished certain goals with those who have those goals.
"Often times, it is a painful thing to understand where you're at financially if you have to figure it out yourself. Boulevard R tries to make it painless and affordable," says Matt Iverson, co-founder of Boulevard R. "The dashboard that we're in the process of developing breaks their next steps down into very manageable paths, in the way that a financial planner would hold their hand and walk them through the process."
A "personalized, actionable roadmap" will run users $49, and for an additional $150 they can get an hour long consultation with an independent financial planner. But users can also use basic elements of the site for free.
Meredith Johnson, a California-based Certified Financial Planner, recommends Boulevard R to her friends who can't afford -- and don't really need -- personal financial planners. She says that thanks to her Boulevard R-developed 30-page financial plan, she's now considering buying long-term care insurance for her parents.
3. How exactly do I invest my money?
Of course, you can always avoid this question by putting your money in a managed account. But if you are interested in more-actively managing your portfolio, you needn't do it alone.
For $150 a year,
will tell you if you're on track for retirement, monitor your portfolio, give you advice on tax-deferred accounts and forecasts for your employee stock options and non-retirement financial goals. Another $150 will get you advice on your taxable accounts and advice on your non-retirement goals.
Financial Engines can instantly compare options across different funds, minimizing fees and maximizing expected returns.
"We're not replacing financial advisers. We're dealing with a portion of the market that they weren't dealing with," says Financial Engines Chief Investment Officer Christopher L. Jones.
A few hundred bucks a year for investment advice isn't necessarily small change. But many people have access to such service from Financial Engines or other companies (including Morningstar Associates and Ibbotson Associates, or Invesra), through their retirement plan sponsors or providers.
But sometimes -- for those willing to pay for one -- a financial planner can add some common sense to software recommendations. Financial Engines initially recommends that a 28-year-old who has $14,000 in assets, $60,000 in annual income, saves $2,000 for retirement per year, and who wants to retire at 65 on $50,000 a year should up their annual contribution to $18,100 a year.
A nice goal perhaps, but probably not feasible for anyone who lives in the real world. Nor is it meant to be. After getting initial advice, users can play with the numbers and find that saving $5,000 a year is likely to get them to their goal.
But sometimes, play as you might, you may find you need a little common sense injected into the process.
And that's where financial planners come in, says Aaron Coates, founder of NexGen, a community group of young CFPs within the Financial Planning Association.
When you're younger, developing the discipline to save matters far more than your rate of return, says Coates. Online financial planning tools can help you do just that.
After you rack up a critical mass of assets, or find that the advice given by software doesn't jibe with reality, that's when you turn to a flesh-and-blood financial planner.