Putting your financial plans in writing can significantly improve your odds of accomplishing financial goals, a new survey shows. But few Americans have bothered to put pen to paper when it comes to their finances.
Overall, 64 percent of Americans have a financial plan, but only 24 percent of Americans have put it in writing, according to the recent Modern Wealth Index from Charles Schwab Corp. The findings are based on a survey of 1,000 Americans ages 21 to 75.
Perhaps even more concerning, the generation closest to retirement age is least likely to have a written financial plan:
- 34 percent of millennials have a written financial plan
- 21 percent of Generation X
- 18 percent of baby boomers
People with a written financial plan are more likely to report other habits that can help build retirement savings. For example, the survey shows that among people with a written plan:
- 51 percent have a household budget (compared with 40 percent of people without a written financial plan)
- 45 percent have an “emergency” or “rainy day” fund that would cover at least three months of living expenses (compared with 26 percent of people without a written plan)
- 40 percent have a monthly savings goal (compared with 29 percent without a written financial plan)
- 37 percent have an up-to-date will (compared with 23 percent without a written financial plan)
- 33 percent have calculated their net worth in the past year (compared with 17 percent without a written financial plan)
- 34 percent have investments outside of their 401(k) (compared with 16 percent without a written financial plan)
- 27 percent contribute the maximum to their 401(k) or a similar plan (compared with 11 percent without a written financial plan)
Charles Schwab’s survey is not alone in its findings.
Earlier this year, a Wells Fargo/Gallup survey of 1,000 investors in the U.S. also found that a minority had a written financial plan. That included 37 percent of nonretired investors and 40 percent of retired investors who had a written plan.
Wells Fargo noted these numbers are similar to those of a 2015 investor survey, “indicating investors haven’t made progress in this important area.”
Joe Ready, head of Wells Fargo Institutional Retirement and Trust, added:
“We’ve seen strong evidence around the power of having a written plan, wherever you fall on the income spectrum. Whether you use a tool online to construct a plan or work with an advisor, it drives confidence and helps inform decisions about budgeting and saving. It’s hard to know where you’re going without a road map.”
If you’re among the majority of Americans who have yet to put a financial plan in writing, you might want to start by getting a handle on your current financial situation. It’s impossible to determine how much money you should save for retirement each month if you don’t know how much you’re spending. See “How to Automatically Track Your Spending and Goals.”
From there, check out “9 Tips to Ensure You’ll Have Enough to Retire.”
Do you have a written financial plan? Let us know below or on our Facebook page.