– Cassandra Warwick
Earlier this year, it was reported that 75% of adults in the U.S. manage their own finances, and do not seek out advice from financial professionals. Although most people know the importance of saving money for large purchases, preparing for emergency expenses, and building a retirement savings, few actually work toward these goals in an effective manner. In fact, CNBC reported in 2016 that while 58% of individuals believe their financial-planning efforts need improvement, 34% have made no effort to prioritize money management. Why is it that although so many people understand the value and importance of financial planning, few actually do it?
They are fearful
Cincinnati.com reported that one of the top factors that causes people to avoid planning for retirement, worst-case life scenarios, and the like is due to fear. Depending on the individual, there could be one or more causes of this fear. First, there are many who become anxious at the thought of planning for a time when they cannot work, if they become ill or injured, or for their final arrangements. Even the thought of getting a life insurance policy can be too fear-inducing for many. It should come as no surprise, then, that a whopping 41% of people do not have life insurance of any kind. Additionally, if an individual does not currently have a healthy financial situation, the thought of diving into one’s current debt figures with a professional can create intense anxiety. However, not having a thorough understanding of one’s financial risks and goals can lead to much greater fear and challenges down the road.
They think that they need to improve their credit first
Credit card debt continues to hit all-time highs in the U.S. Currently, the average household now has $6,929 in monthly credit card debt. Additionally, 86 million people have fears of maxing out their credit cards, and 1 in 7 people are afraid to see their credit report. Prior to even considering the creation of a financial plan, it is common to think that you need to get your financials in the best shape possible.
While this is helpful, it is technically not necessary to improve your credit score before planning for the future. If an individual does want to get their credit in order first to assist with shorter-term goals, there are companies that can provide credit help. By utilizing simple techniques (such as removing errors from a credit report), an individual can quickly see an improvement in his or her score, which can make various aspects of financial planning easier.
They think they have too much debt
In addition to thinking that one’s credit is in too poor of shape to create a financial plan, many more assume the same about having too much debt. There is a common misconception that only those who have little or no debt, and those who are wealthy, should create a financial plan. A large number of people also believe that quality financial advice is not an option for their current situation. Forbes reported over 44% of respondents admitted they think useful financial advice will cost more than they can afford.
Thankfully, these notions are simply myths. For those who are in significant debt, it is even more essential to make a plan for the future. Setting goals for paying off credit cards and loan balances at a rapid pace allows individuals to have more available funds sooner. When debts are eliminated, it is much easier to save for long-term goals, such as retirement. Additionally, financial planning professionals range significantly in terms of affordability. However, most services are reasonable, even for individuals who have a large amount of debt.
They believe that they can manage their money on their own
For those who are managing a simple household budget (and perhaps a retirement savings), it is a common belief that professional financial planning is unnecessary. In another article by Forbes.com, it was stated that a large number of American adults think that they can handle their finances, including their short-term and long-term goals, by themselves. Unless stocks, real estate investments, self-employed business finances, or other complex situations are present, many think that it is perfectly acceptable to take a DIY approach.
They do not know who to turn to for financial advice
In a recent TIAA-CREF survey, 64% of respondents said that they have a challenging time knowing what financial advisors can be trusted. If you do not have recommendations from family, friends, or colleagues, knowing who to turn to for financial advice can feel like a daunting task. It can be so overwhelming that it prevents people from making a financial plan altogether. Thankfully, with a bit of research and asking around, quality financial advisors can easily be discovered.
While there are numerous reasons that people have for not seeking professional money advice, none of them are actually true. No matter what your financial situation may look like, creating an effective plan for the future is essential for the wellbeing of both you and your family.