You have heard me say many times how important I think planning is. In fact, you might say I’m a nut case about it. I insist that you plan your week in advance every week. Well, I just read an article in the October 2006 issue of Money Magazine, and while they were referring to planning for retirement, the point is the same. Here is a direct quote from the article entitled “What Works in Retirement Planning:”
The simple act of planning-calculating a retirement target, say, or estimating how much you should save-has a surprisingly large impact on your odds of success. Consider the results of a study by Annamaria Lusardi, a professor of economics at Dartmouth College, and Olivia Mitchell, a professor of insurance and risk management at the University of Pennsylvania and executive director of the Pension Research Council. Analyzing data from a 2004 national survey on the first wave of baby boomers, Lusardi and Mitchell found that those who did “a lot” of retirement preparation had a median net worth of $200,000, compared with $84,000 for those who did the least. “Even a small amount of planning can make a huge difference,” says Lusardi. Those who did “a little” were also ahead, with a median net worth of $172,000.
Planning pays off because it’s a crucial psychological trigger. Studies show that writing a plan down-or even simply thinking about it-greatly increases the likelihood that you will follow through. “Planning helps us overcome the internal blocks that lead us to procrastinate or worry,” says Dr. Richard Peterson, a psychiatrist and author of the upcoming book Inside the Investor’s Brain. And any facts you pick up along the way may motivate you or scare you into action.
So just remember the next time I ask you, “Did you plan out your week in advance?” that there is method to my madness. I hope this helps you reach your goals. Take care.