Liz Weston: One money habit — planning — makes all the difference

Planning ahead is hard when you’re broke. But planning ahead may be the best way to stop being broke and start building a solid financial future.

People who have a strategy tend to save more money and be financially healthier than those who don’t, studies have found. For example:

—Those who thought about retirement — “a lot,” ”some” or even “a little” — approached retirement age with twice the wealth of non-planners, according to a 2007 Pension Research Council study. Another study in the Journal of Consumer Affairs in 2011 found that simply using a retirement calculator increased someone’s likelihood of saving.

—Parents who created a plan to pay for their children’s college educations saved 76 percent more than parents who saved but didn’t have a plan, according to Sallie Mae’s How America Saves for College 2016 report.

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—Households that plan for large, irregular expenses are 10 times as likely to be financially healthy as those that don’t, according to a study published in 2015 by the Center for Financial Services Innovation, a nonprofit trade group that promotes financial health.

The center’s study defined “financial health” as having emergency and retirement savings, sustainable debt loads, good credit scores and property, life and health insurance. While the health of one’s finances tends to rise with income, age and education, the study discovered that the propensity to plan had an even greater effect than those other factors on predicting who’s financially sound.

It’s important to note that people who plan don’t just focus on long-term goals, such as retirement and college. They’re also planning and saving for the near term, including expenses that will come up next week or in three or six or 12 months. You can’t dream about a debt-free future without a plan to pay tomorrow’s bills first.

“Just planning ahead…

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