Managing your finances likely isn't the most exciting task on your to-do list, but it's crucial if you want to reach all your financial goals and set yourself up for long-term success.
Whether you're saving for retirement, paying down debt, or simply budgeting for your everyday expenses, it's important to have a plan in place. A little bit of planning can go a long way in making sure your finances are as healthy as possible, and without any type of plan, you're essentially just blindly throwing your money around and hoping for the best.
However, millions of older adults are making a critical mistake when it comes to planning for the future. And if they don't make any changes soon, it could be incredibly costly.
Image source: Getty Images
Too many older adults aren't planning for the future
More than one-third (34%) of baby boomers say they haven't done any financial planning at all in the last two years, according to a survey from the National Association of Personal Financial Advisors. In other words, they haven't planned for retirement, managed a budget, set any goals, reviewed their investments, considered their insurance needs, or done any tax or estate planning.
It's not just boomers who are struggling with a plan, either. In fact, close to a quarter (24%) of Gen Xers also say they haven't done any financial planning over the past two years. The generations most likely to have thought about the future are the millennial generation and Gen Z -- only 16% and 15%, respectively, admitted they haven't done any recent financial planning.
Although it's important for people of all ages to be thinking about their future plans, it's arguably more critical for older workers to take a hands-on approach to their finances. If you're nearing retirement age and haven't reviewed your investments or thought about your retirement plan recently, it's tough to tell whether you're on track. The longer you wait to realize you're off track, the harder it will be to make adjustments and catch up.
In addition, although it's a morbid thought, older adults need plans in place in case the worst happens. Reviewing your insurance needs and creating an estate plan can ensure your family is protected if something happens to you. And it's a good idea to review these plans regularly to double-check that everything is up to date.
If you're not doing any planning now, you're putting your entire financial situation at risk. Fortunately, putting a plan into place isn't as difficult as it may seem.
How to create a solid financial plan
The first part of establishing a financial plan is to set a few goals, like preparing for retirement, paying down your debt, or creating an emergency fund. From there, you'll need to closely examine your money situation to find extra cash to put toward those goals.
If you don't do so already, start tracking your spending to get a clear idea of exactly where your money is going every month -- because it's much harder to stick to a budget and save more if you don't know how much you're spending. Once you've gotten into the habit of tracking your spending, it will be easier to find areas of your budget to cut back. Then you can begin reallocating that money toward your financial goals.
Also, keep in mind that you'll need to check in on your plan every so often and make adjustments when necessary. This is especially important when saving for retirement, because there are loads of factors to consider as you're saving. At least once a year, check that your retirement savings goal is still accurate, and decide whether your current savings are on track to reach that goal. Also, take a look at your investments to see if your asset allocation is still aligned with your risk tolerance. As you get older and closer to retirement, your investment portfolio should ideally get more conservative to protect your savings.
The longer you go without giving your plan a checkup, the more challenging it will be to correct any potential problems. If you reach retirement age and then suddenly realize you don't have nearly enough saved, there's not much you can do late in the game. But by creating a plan and doing your best to stick to it, you'll have a much better chance of achieving all your financial goals.
