The Power of Planning

//The Power of Planning

The Power of Planning

Some of us are predisposed to plan. We plan meals, school schedules, weekend social activities, workouts and vacations to name just a few examples. Others are more spontaneous, taking life as it comes and reveling in the unknown. An unpleasant meal, weekend activity or vacation can be dealt with easily, another one will come along shortly.

Your financial life is a different animal altogether. It we trip up the first time, things may not fall apart, but the challenge becomes stiffer to get our financial selves back on track. We don’t get a second chance to prepare for retirement, there is no ‘do-over’.

The act of creating, and following, a financial plan is powerful. We recently came across a retirement study that examined the role that planning can play in affecting retirement savings decisions. The analyzed subjects were grouped into the four categories below. The amounts that follow represent the median net worth for each group. Successful planners accumulated nearly three times the amount of wealth than non-planners. Moreover, the amount of planning also matters: Those who are able to develop a plan and those who can stick to with the plan accumulate much more wealth than simple planners.

Non-planners – those who had no plan ($338,418)
Simple planners – those who actually attempted to do a retirement saving calculation ($742,843)
Serious planners – those that had a plan for how to save money ($910,382)
Successful planners – those that actually had a plan and stuck to it ($1,002,975)

It should not be surprising that having, and sticking to, a plan generates the best outcome. But we were surprised at the news that planning can result in 2-3 times greater wealth. Even just calculating the amount of money you need can have a material impact. At its core, a plan allows you to focus on the things you can control with predetermined courses of action to build discipline.

Most of us would wish to be successful planners, but the study reveals that planning for retirement is difficult, few do it and fewer still think they get it right. The payoff is worth it.

2019-10-18T11:16:54-06:00 October 18th, 2019|Financial Planning|0 Comments

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