Survey finds big differences in financial planning among Americans
By National Underwriter
By Warren S. Hersch
Close to nine in ten American households do formal or informal financial planning but the extent of this planning varies greatly, according to new research.
Sponsored by the Consumer Federation of America (CFA) and Certified Financial Planner Board of Standards, the research shows that only one in five household decision-makers (19 percent) are comprehensive planners, who take a methodical approach to financial planning, while one in ten (10 percent) do virtually no financial planning at all. The research further identifies nearly two-fifths of households (38 percent) as basic planners and one-third of households (33 percent) as limited planners.
While higher income households are more likely than lower income households to plan, more than half (54 percent) of comprehensive planners have annual incomes below $100,000, the report adds.
“Those families with the lowest incomes are the ones who would benefit the most from financial planning,” says CFA’s Executive Director Stephen Brobeck in a statement. “Households with the fewest financial resources benefit the most from carefully planning spending, saving and debt management. Marshaling limited financial resources to meet essential needs represents a huge challenge for these households.”
The CFA and CFP Board undertook the research with assistance from Princeton Survey Research Associates International (PSRAI), which surveyed a representative sample of 1,002 financial decision makers nationwide from April 12 to 24, 2013. The survey includes more than 60 questions and has a margin of error of plus or minus three percentage points.
“This research reaffirms the value of financial planning for all households and also the value of receiving assistance from a financial professional who always puts the clients’ best interest first and abides by a fiduciary standard of care,” said CFP Board CEO Kevin R. Keller, CAE.
Among the report’s additional findings:
|Survey Items included in the Household Financial Planning Index|
|Total||Comprehensive Planners||Basic Planners||Limited Planners||Non-Planners|
|COMPREHENSIVE FINANCIAL PLANNING BEHAVIORS|
|Have a comprehensive financial plan||32%||100%||35%||1%||0%|
|Likely to get a comprehensive financial plan in next 12 months||16%||0%||31%||11%||1%|
|Have updated/will update plan in previous/next 12 months||23%||84%||18%||0%||0%|
|Plan is written down or in computer/electronic file||26%||95%||22%||0%||0%|
|Spent 2 hours or more preparing or reviewing plan||21%||77%||18%||1%||0%|
|Had any professional help or used computer/online tool in creating plan||28%||91%||30%||0%||0%|
|Had a financial professional with fiduciary responsibility create plan, specifically Certified Financial Planner™ professional or Registered Investment Advisor||19%||67%||17%||0%||0%|
|Current plan has 5 or more key planning elements, or future plan will have 5 or more key planning elements||43%||96%||58%||7%||0%|
|BASIC FINANCIAL PLANNING BEHAVIORS|
|Have a household budget||57%||88%||66%||44%||6%|
|Household budget is written down||32%||63%||41%||15%||0%|
|Planning for current or future retirement||52%||88%||64%||31%||8%|
|Planning for emergencies||32%||80%||38%||7%||1%|
|Planning for any other financial goal (e.g. child’s college, down payment on house, major purchase, parent’s medical expenses)||26%||60%||33%||7%||0%|
|CREDIT CARD DEBT MANAGEMENT BEHAVIORS|
|No credit card or pay off bill in full each month||47%||62%||53%||45%||0%|
 Retirement in this table includes both those planning for future retirement among those not yet retired and those currently retired who were asked if they have ever calculated how much money they can withdraw each year from savings and investments and still have enough to last the rest of their lifetime.
Originally published on LifeHealthPro.com