If you think you need to get your financial house in order but haven’t taken steps to do so, you’re not alone.
Some 58% of Americans believe their financial planning efforts need improvement, but 34% of us have done nothing to plan for our financial future, according to a study recently released by Northwestern Mutual.
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The study is based on an online survey of 5,474 US adults aged 18 and older, conducted earlier this year by Harris Poll on behalf of Northwestern Mutual. Survey results were weighted by US Census Bureau targets for education, age and gender, race and ethnicity, region, and household.
According to Northwestern Mutual, the results demonstrate that there is a deep disconnect between what Americans know they should be doing about finances and what they are actually doing. For example, two-thirds of Americans (67%) consider themselves “savers,” but more than half of us (54%) have a level of debt equal to or greater than our savings.
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Although many Americans worry about having enough money in retirement, it seems that only a fraction of us seek help planning for retirement.
According to the study, two in five Americans (43%) have “not told anyone,” including friends and family, about planning for their retirement. Additionally, 21% of Americans are “not at all confident” that they will be able to achieve their financial goals.
For some financial advisers, the findings of the study are distressing but not really surprising. Sean Michael Pearson, certified financial planner and advisor at Ameriprise Financial Services, said many Americans are overwhelmed by the overabundance of financial information they have to sift through to make decisions for themselves.
Setting priorities is essential
“People often feel like there’s too much information available because of the internet,” he said. “The overabundance of information makes a lot of people nervous about being wrong.”
According to Pearson, one way to overcome such nervousness is to first define your financial priorities, such as setting goals for savings and debt repayment. Then, determine the steps you need to achieve those goals.
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“Nobody walks into Home Depot and tries to find the best tool without first knowing what kind of project they’re doing,” he said. “People usually say, ‘Here’s my project, and what’s the best tool to do it with?’
“It’s the same premise you should use when it comes to financial planning,” he explained.
Americans are busy people, Pearson said, and many of us feel like we’ve already failed when it comes to saving money and taking other steps to improve our finances. As a result, some of us develop a fatalistic attitude.
Pearson added that “if people feel like they’re late, it can be very deflating, and they can be like, ‘Why start now?'”
“My answer to that question is that the best time to plant the tree was 20 years ago, but the second best time is today.”
“There is always a positive path to follow,” he said. “All the decisions people make, if they follow a plan, are better than the decisions not made.”
Yet a growing number of Americans are content to hope for the best.
According to the Northwestern Mutual survey, the number of Americans age 25 and older who identify as “non-planners” and as having “no set financial goals” doubled to 14% between 2012 and 2015.
The survey found that “an unforeseen financial emergency” is what Americans fear most when it comes to money matters. Still, those who believe their financial planning efforts need improvement would be more motivated by “a financial windfall” to take action, according to the survey.
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“This is sad news for all of us,” said Micky Reeves, CFP and wealth management adviser at Buckingham Asset Management.
“Too many people think you need wealth first and financial planning second,” he added. “It’s completely upside down. Good financial planning will lead people to build wealth.”
Many Americans who already have financial plans are not exactly convinced that those plans will hold up over the long term. Nearly one in four Americans don’t think their financial plans can withstand the inevitable ups and downs of the economy, according to the survey.
This finding, Reeves said, demonstrates how important it is for advisors to get buy-in from their clients when it comes to financial plans. After all, even well-laid financial plans aren’t much use if clients don’t stick to them, said Reeves, who coaches other advisors.
“There are a lot of advisors who are technically brilliant, but they talk above their clients and therefore do little to move the ball forward in terms of helping clients progress” , did he declare. “If we as advisors want to help clients improve their financial security, we have to be very good educators and motivators.”
—By Anna Robaton, special for CNBC.com