Do you have a financial plan? It’s the season of resolutions and it’s not too late to start making your financial situation better over the coming year. Unfortunately, 54% of people don’t even know where to start looking for a financial planner — it’s not something you can just Google and hope for the best, after all. Currently only 36% of Americans say they have a positive relationship with money, while 33% say their relationship with money is worrisome and 45% say it is stressful. A little financial planning can help alleviate much of that stress and set you on your way to a more secure and fulfilling future.
Reversing The Savings Crisis Trend
By now we’ve all heard that half of U.S. households don’t have enough savings to cover a $400 emergency. The savings rate has fallen from 12% in the 1970s to just 3% today. Income and wage growth has remained stagnant over the last couple of decades while the cost of living has continued to rise. Compounding the savings problem is the fact that returns on savings accounts, even “high-yield” savings accounts, are at an all-time low.
Still, saving is necessary for survival in the long run. Savings are a cushion for the blow of hard times such as joblessness or serious illness, and eventually savings will be all you have to live on as you reach an age during which you can no longer work.
Currently, 38% of U.S. households report making progress on their savings goals. Of households with income, 68% spend less than they make and save the rest. But only 45% say they are saving enough for retirement.
It’s Time To Start Setting Goals
Having a plan actually makes it more likely that you are going to meet your goals. After all, goals without a plan are just wishes (at least I saw that on a t-shirt). Of people with a plan to meet their financial goals:
- 64% are saving enough to retire comfortably
- 82% have sufficient emergency savings
- 56% are making excellent progress toward their financial goals
- 86% are living under their means and saving the rest
- 88% are either debt-free or actively working to reduce consumer debt
Conversely, of those without a financial plan:
- 31% are saving enough to retire comfortably
- 52% have sufficient emergency savings
- 24% are making excellent progress toward their financial goals
- 54% are living under their means and saving the rest
- 74% are either debt-free or actively working to reduce consumer debt
Planning for retirement is a huge chunk of your financial plan no matter who you are. If you think it’s hard to save money now, wait until you’re 70 and still working. If you want to retire in a reasonable amount of time, it’s time to throw conventional wisdom out the window. Traditionally we are told to save 10% of our income for retirement, but this assumes we start saving at 21 and work full-time without incident until 65. Saving 10% for retirement means we can retire after working 51 years, saving 20% means we can retire after 37 years, saving 30% means we can retire after 28 years, and saving 40% means we can retire after 22 years.
Financial planning can give you the life you want if you just stick with it. Are you ready to make 2020 the year you finally get your finances in order?