About three in five Americans live paycheck to paycheck but only one in four have a written plan to tackle their finances. And, according to Charles Schwab's 2018 Modern Wealth Index, that's because few people in the U.S. believe their level of wealth deserves a plan.
"The idea that financial planning and wealth management are just for millionaires is one of the biggest misconceptions among Americans, and one of the most damaging," Joe Vietri, senior vice president and head of Schwab's retail branch network, says in the study, adding that those who do have a written plan also tend to havegood financial habits.
The index tracked how 1,000 Americans aged 21-75 manage wealth across four categories: goal setting and financial planning; saving and investing; staying on track, financially; and having confidence in reaching financial goals. It then scored them on a scale of 1 to 100 based on how well they perform in these categories in their daily lives.
Having a written financial plan can lead to better daily money behaviors, Schwab finds, and those who have a plan are more likely to be regular savers, stay engaged with their investments, effectively manage debt and have a better outlook on reaching their goals.
"When we look at the top 10 percentile of overall performers, there's a consistent theme that they're diligent planners — three in four say they have a written financial plan," Terri Kallsen, executive vice president and head of Schwab Investor Services, says in the study.
"Planning is critical to achieving any goal. It's like establishing an exercise regimen to get in shape — we need to take the same approach to keep our finances in good health and on track."