Financial Planning Critical Regardless of Wealth

As Americans struggle in the recession’s aftermath to prepare for retirement, those who have taken the time to put together a financial plan feel more confident and report more success managing money, savings and investments than those who have not.

This is according to a survey of 1,508 financial decision makers in households in the U.S. It is part of a 60-page report released today by Consumer Federation of America and CFP Board. The survey was conducted by Washington D.C.-based Princeton Survey Research Associates International.

“Some people believe that financial planning is only for the rich,” CFP Board CEO Kevin Keller says. However, “those with a comprehensive plan, regardless of what their socioeconomic [status] may be, are both feeling better and doing better because of having that plan [whether or not] it’s a plan they paid for or if it’s something they did on their own.”

Nearly 38% of those surveyed said they live paycheck to paycheck, while less than 30% indicated they felt comfortable financially and only about a third, or 34%, think they can afford to retire by age 65.

Yet, according to several measures of financial well-being, those with a financial plan report faring better than those without one:

“Our survey clearly shows that having a personal financial plan helps both rich and poor achieve their financial goals," Stephen Brobeck, the Consumer Federation’s Executive Director, said in a statement. "Having a financial plan increases one's confidence and effectiveness in managing, borrowing and saving money. 

Comparing Results

The survey utilized a number of questions asked by a 1997 survey conducted by the Consumer Federation of America and NationsBank, which also was developed with and administered by Princeton Survey Research Associates International.  This made it possible to compare consumer attitudes and habits today – in the aftermath of the worst recession since the Great Depression – with those back in 1997, when unemployment was lower and consumers were more optimistic.

The findings include the following: 

The 2012 survey also revealed that slightly more than half of respondents, or 55%, said “it’s hard for me to know who to trust for financial advice,” and 52% said “to me investing seems complicated.” More than half, at 55% said, “I’m worried about losing my money if I invest it,” which represents a significant increase from the 45% who said they felt the same thing in 1997. 

“Consumers understandably are more nervous about investing their money given recent revelations about financial fraud, manipulation and abuse of clients,” Keller said in a statement. “This doesn’t mean that people shouldn’t create a financial plan and be prepared.”

Both The Consumer Federation and CFP Board suggest a useful tool for consumers who want to make a plan is the website LetsMakeaPlan.org.

Survey Methodology

The Consumer Federation of America and CFP Board developed the survey with Princeton Survey, which called respondents on their landlines or cell phones. Interviews were conducted between May 7 and May 20. The margin of sampling error on the total sample at the 95% level of confidence is plus or minus three percentage points. The report only includes statistically significant differences at the 95% level of confidence.

The full survey report and detailed results can be found at consumerfed.org or cfp.net.