Comprehensive Financial Planners are Better Off
October is Financial Planning month. Why should we pay attention to financial planning? A report by Princeton Survey Research Associates International  reveals that there is a direct correlation between affluence and financial planning. The Household Financial Planning Survey and Index looked at the financial planning habits of American families and evaluated the lifestyles and demographic of each group.
The survey included nine areas of financial planning:
- identifying financial goals
- analyzing spending
- reviewing investments
- debt management
- saving for emergencies and retirement
- insurance coverage
- setting up wills or trusts
The report revealed that 19 percent of American households are comprehensive planners, 38 percent are basic planners, 33 percent are limited planners, and just 10 percent do no financial planning at all.
Comprehensive Planners: This group is the most affluent and also the most confident about their money management. They’re making a determined effort to get it right. Their priority is to protect their assets and be financially prepared for any situation that might arise. One of the differentiating factors is that two-thirds of this group has sought assistance from a certified financial planner or investment advisor. Although they have credit card debt, it is well-managed, and 92 percent have a plan in place to address the issue.
Basic Planners: This group is described as the “typical” American household in the middle income range. While they have a plan to save for goals such as college, retirement, or buying a home, they feel they are behind where they ought to be. They lack a comprehensive financial plan to cover all eventualities. Just over half (55%) have a retirement plan in place, but only 38% have an emergency fund, and 20 percent have significant credit card debt.
Limited Planners: This group tends to be below average in terms of education, and they are more likely to be single, unemployed, or work part-time (only 38% have a full-time job). They have limited financial resources, and most are living paycheck-to-paycheck. They’ve managed to save at least some money toward specific financial goals and feel somewhat confident about their money management.
Non–Planners: They share a similar income level with Limited Planners and are struggling to pay basic expenses. They lack confidence in their ability to manage their money. Credit card debt is a problem, and few of them have a plan to pay down the debt. Ninety-two percent have no future financial goals like retirement, emergencies, or a child’s college education.
This report clearly shows that there is a correlation between financial literacy, financial planning, and lifestyle. One could argue that it is a “chicken and egg” situation, but there is no doubt that increasing your knowledge of financial issues, taking control of your finances, and putting a comprehensive plan in place will help improve your life.
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