"I'm going to lose those 10 extra pounds this year.” Is it just a casual statement, or will it be followed by action? We wondered the same thing about financial planning, which is why we asked Americans to weigh in. As it turns out personal finances came in near the top of priorities for improvement, yet nearly half of Americans surveyed are taking a casual approach to financial planning. Where do you stand – are you just talking the talk? Or are you walking the walk?
The State of Planning in America Study is a research series examining the kinds of planners and their feelings of financial preparedness. We asked more than 1,000 Americans about their approach to planning, financial priorities, improvements they want to make, and what they are doing to meet their goals. We found that many Americans are casual about financial planning – if they have a plan at all. That’s true even though personal finance is second only to health (and well ahead of career and family) in terms of areas that people want to improve in this year.
That means you’re ahead of the crowd if you’re working with a financial representative and following a plan to achieve your long-term financial goals. See how you compare, and what steps you might want to take moving forward:
- Nearly half (45%) of Americans are casual about financial planning. That includes more than one-third (38%) who say they are “informal” planners which means they have goals in place but no plan to achieve them, and almost one in 10 (7%) that have no goals or plans in place at all. Do you know what your plan is? If you aren’t sure, a financial representative can help you develop one that is customized for your specific goals and needs.
- Finances are top of mind; most Americans are going “back to basics.” Personal finance (43%) ranks second only to personal health (48%) among priorities for improvement in 2012. When asked what steps people plan to take to improve their financial well-being, it’s clear that Americans are focused on the basics: “pay down my debt (62%),” “develop/follow a budget (61%),” “save a portion of my paycheck regularly (58%),” “build up an emergency fund (58%),” and “organize financial documents ( 56%).”
- People are feeling cautious and conservative. “Slow and steady wins the race” is far and away the preferred approach to saving and investing, favored by more than a third of Americans. When it comes to investments, 40 percent prefer low risk opportunities with lower returns compared to only 25 percent that prefer higher risk, higher returns. Interestingly, more than one in five Americans (21%) would prefer to be more cautious but feel they have too much catching up to do.
- Many Americans feel financially unprepared to live beyond average life expectancies. The Centers for Disease Control (CDC) says that average life expectancy for Americans is 78.2 years (75.7 for men and 80.6 for women). Yet, the study shows that only about half of Americans (56%) feel financially prepared to live to age 75, less than half (46%) feel prepared to live to age 85 and barely more than one-third (36%) feel prepared to live to age 95.
- Want to feel more financially prepared? Seek advice, practice more discipline. The research indicates that certain segments of the population feel more financially prepared than others. Americans that describe themselves as “advice seekers” and “delegators” (both of which work with a financial professional when making decisions about their financial future) are more likely to feel financially prepared to live longer lives:
- Age 75: advice seeker (77%) and delegators (77%) vs. independent investors (53%)
- Age 85: advice seekers (65%) and delegators (64%) vs. independent investors (42%)
- Age 95: advice seekers (51%) and delegators (49%) vs. independent investors (33%) than those who are independent investors.
In addition, the more disciplined people reported being with their finances, the more financially prepared they reported feeling:
- Age 75: Highly Disciplined (74%), Disciplined (65%), Informal (46%), and Non-Planners (23%)
- Age 85: Highly Disciplined (73%), Disciplined (52%), Informal (34%), and Non-Planners (19%)
- Age 95: Highly Disciplined (60%), Disciplined (40%), Informal (26%) and Non-Planners (17%)
- Americans are clearly focused on protecting their finances, yet few own protection products. “Protection” is the theme when it comes to financial goals for Americans. Included among the most important financial goals are, “protecting the family’s standard of living if the breadwinner passes away” (71%), “protecting income in event of a disability” (62%) and “being able to pay for long-term care if needed later in life.” (56%). Yet, less than a quarter own a life insurance product (24% term, 23% whole life), and less than one in 10 Americans own long-term care insurance (9%) or disability income insurance (8%).
The State of Planning in America Study shows that having a plan allows you to walk the talk, placing you a step ahead on the path to financial security. Contact a financial representative for more information on how you can make these strides with expert guidance.