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Is financial planning for everyone?


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Princeton Survey Research Associates International recently conducted a survey of financial decision makers in 1,508 households across the nation. Their survey found that 38 percent of Americans live paycheck to paycheck and that less than 30 percent of US households felt financially secure. Only 34 percent of the households surveyed believed that they could afford to retire by the time they reached age 65.

The Princeton survey was included in a 60-page report recently released by the Consumer Federation of America.  Respondent families were categorized in four annual income categories; 1) under $25,000, 2) $25,000 - $50,000, 3) $50,000 to $100,000 and 4) Over $100,000   One of the key findings of this report was that, regardless of income level, families with a written financial/retirement plan felt much more financially secure than families which had no written financial plan. Here are some of their specific findings:

1.   Across all income levels, 50 percent of the families that had a written financial plan felt that they were on pace to meet all of their financial goals.  Of the families with no financial plan, only 32 percent felt that they were on pace to meet their financial goals.

2. 52 percent of families with financial plans felt “very confident” with their ability to manage their money, savings, and investments.  Only 30 percent of families without financial plans felt very confident in these same areas.

3. 48 percent of families with financial plans described themselves as living comfortably financially versus only 22 percent of families without financial plans.  The percentage of families with financial plans who felt that they were living comfortably with incomes between $50,000 - $100,000, was the same percentage as families making over $100,000 without a financial plan.  This finding demonstrates that income was not the only consideration for families to have a “comfortable” financial life.

4. By a margin of almost two to one, for all families making over $50,000, families with financial plans had a higher percentage of income being saved and had built significantly greater wealth than those families without plans.  By the same (2-1) margin, families making under $50,000 who had financial plans and used credit cards were more likely to pay off credit card bills in full each month.

5. Of the 1,508 families interviewed, only 31 percent were said to have a comprehensive financial plan while 49 percent reported having a retirement investment plan.  Thus, about half of all respondents were included in the category of having a written financial plan

In 1997, a similar survey was conducted by Princeton Survey Research Associates International for the Consumer Federation of America. Some fairly significant changes have occurred between 1997 and 2012:

• The number of families living paycheck to paycheck has increased from 31 percent in 1997 to 38 percent in 2012.
• In 1997, 38 percent of families felt they were behind in savings for retirement compared to 51 percent in 2012.
• In 1997, 50 percent of respondents felt they would be able to retire by age 65 compared to only 34 percent today.

Respondents in the 2012 survey were asked to list their primary concerns in seeking financial planning advice. More than 55 percent of respondents stated, “It is hard to know who to trust for financial advice,” and 52 percent said, “To me, investing seems too complicated.”  More than half said “I’m worried about losing my money if I invest it.”  This represents a 22 percent increase from the 45 percent who made this statement in 1997.

While this survey demonstrates that consumers are nervous about how to invest their savings as well as with whom to trust as their financial advisor, it also shows that families with a written financial/retirement plan have a significantly higher probability of meeting their financial goals.

If you have concerns about meeting your personal financial goals, you make want to seek the services of a Certified Financial Planner (CFP®).  A fee only CFP® receives no commissions and thus has no incentive to sell you any financial products. The CFP® code of ethics requires that a fee only planner take a fiduciary responsibility when working with clients in helping them define and meet their short, medium and long-term financial goals.

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Wayne Farlow

Wayne Farlow is the founder of Financial Abundance, LLC, a Registered Investment Advisor firm.  He is a Certified Financial Planner (CFP®), focusing on Retirement Planning, Investment Management, Small Business Owner Planning and Sudden Wealth/Inheritance Planning.  His book, “Financial Abundance Guide,” is available free at www.farlowfinancial.com .  He can be reached at wayne@farlowfinancial.com or at 303-554-0309.

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