New research from Charles Schwab shows that three in five Americans live paycheck to paycheck and that only one in four have a written financial plan.

According to Schwab’s 2018 Modern Wealth Index, having a written financial plan can lead to better “daily money behaviors,” and this goes for those near the bottom of the income scale. The Wealth Index lumps the responses of roughly 1,000 workers into “planners” and “non-planners,” and no surprise, across all important savings and investing metrics, planners are doing a lot better than their more lackadaisical counterparts.

Terri Kallsen, executive vice president and head of Schwab Investor Services, points out that planners are more likely to have a higher overall Modern Wealth Index score, be regular savers, and effectively manage their debt. Far more planners say they can pay all their bills and still save each month, far more have an emergency fund and far more have life insurance. Not surprisingly, far more planners feel financially stable relative to non-planners, whatever their level of income.

“When we look at the top 10 percentile of overall performers in our Modern Wealth Index, there’s a consistent theme that they’re diligent planners—three in four say they have a written financial plan,” Kallsen says. “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.”

When it comes to investing behavior, planners are also more likely to stay engaged with their investments, be aware of the fees they are paying, and have confidence about reaching their goals.

Time to help the non-planners    

According to the Charles Schwab analysis, among those without a written plan, nearly half (45%) say this is because they don’t think they have enough money to merit a formal plan. Next-most common, 20% say getting a crafting a formal plan simply never occurred to them, and another 20% say they wouldn’t know how to go about getting 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,” warns Joe Vietri, senior vice president and head of Schwab’s retail branch network. “Whether people think they don’t have enough money, believe it would be too expensive, or just find the whole concept too complicated, the longer they wait the harder it is to achieve long-term success.”

Vietri observes that Schwab held more planning conversations with clients in 2017 than the year before, and the number of planning sessions has been steadily rising for years. He highlights the fact that Millennial workers seem to be quite interested in planning opportunities: 31% percent have a written financial plan compared to 20% of Gen X and 22% of Boomers. At the same time, Schwab says 36% of Millennials have specific savings goals, compared to 25% of Gen X and 17% of Boomers. And despite their younger age and smaller account balances, Millennials are almost as likely as Boomers to work with a financial advisor (22% and 25%, respectively) while Gen X lags (16%).

“What we see with younger investors is they aren’t just saving and investing for retirement, which has been the primary focus of previous generations,” Vietri says. “They know they need to save for longer-term goals, but they also save and invest to fund near-term items. This focus on nurturing themselves as they age might be one explanation of why they are so engaged with their money. Interestingly, Millennials are also the least likely generation in our survey to think the amount of money they have doesn’t merit a plan. We can all learn something from them.”

More information and an opportunity to take the Modern Wealth Index survey are available here.