Financial Resolutions Baby Boomers Should Teach Their Kids in 2017

Education and adoption of key model behaviors can improve overall financial well-being.

As we prepare to welcome a new year, along with the diet and exercise resolutions we are all making, may I suggest lending a hand to the next generation by passing along some much-needed financial advice? These four resolutions can help our kids build financial confidence and reduce their stress in 2017. No small feat, but first, I’ll tell you about the research behind them.

The Guardian Life Insurance Company of America® (Guardian) recently conducted a study to better understand the emotional and financial confidence of working Americans and to answer two important questions: (1) How are stress and financial decision-making linked?; (2) Which behaviors lead to emotional and financial confidence and satisfaction?

According to The Guardian Study of Financial and Emotional ConfidenceTM, 78 percent of working American families are stressed about their financial future, regardless of age, gender, income, or other demographics. However, their behaviors contradict the financial priorities they identify as most important in their lives:

· Nearly 60 percent of Americans believe that having at least some guaranteed income apart from Social Security in retirement is a priority, but less than one in in four feel very confident in any aspect of their retirement finances;

· While 52 percent of Americans say that building savings is a priority, more than two-thirds would not describe themselves as good at living within their means;

· Having a solid, long-term plan for achieving financial objectives is a top priority and important to 47 percent of Americans, however 81 percent don’t feel that they are good at setting up a long-term financial plan and sticking with it.

These disconnects in priorities and behaviors can lead to varying degrees of stress and lack of confidence. Bringing our financial behaviors into alignment with our financial goals is critical to both our emotional and financial well-being.

It’s good to know, however, that when moving along the spectrum from concerned to confident, even small changes in behavior can result in meaningful improvement. And while the definition of financial well-being varies widely from person to person, the research affirms that overall life satisfaction and financial well-being are inextricably linked.

Based on the study’s findings, Guardian developed a Financial Confidence Quiz (link) that enables Americans to assess how confident they are about their financial future, and offers insights into how they can make improvements. After responding to a series of statements, individuals learn which financial and emotional confidence segment may best describe them:

Day-to-Day Decision-Maker: Generally stressed and struggling with finances, this group includes the highest proportion of women and millennials.

Ambitious Spender: Stressed but coping, this group includes the highest number of small business owners.

Retirement Realist: This group is fearful of the future, with an above-average emphasis on savings and having adequate retirement income.

Confident Planner: These individuals put an above-average emphasis on work/life balance, retiring with secure income, and good investment decisions, leading to a higher degree of overall life satisfaction than the other segments.

The most fascinating lesson learned from this research is that it’s not your income that is the sole driver of confidence, but rather your attitudes and behaviors that shape and influence your overall financial and emotional confidence. By mimicking the behaviors of the most confident Americans, The Confident Planners, anyone may be able to take baby steps to achieve more positive life and financial outcomes.

So while there are lots of life stressors that we can’t control, like terrorism, reactions to the recent election, and the pace of change, we can take control of how we approach our finances to reduce our overall stress and live more confidently — and it’s not just about making more money. That’s why our kids should adopt these four resolutions for 2017:

Make a Plan: Failing to prepare is preparing to fail. Success can be achieved by living within set means and having a written plan with specific objectives that is reviewed annually. It doesn’t need to be elaborate, but it shouldn’t be short-sighted. Confident Planners are much more focused on the long term than the short term. Just having a plan in place can reduce stress and increase happiness. Start with the basics: write down your short and long-term financial priorities and what you think you’ll need to achieve them.

Raise Your Financial IQ: It’s important to understand fundamental financial concepts and products, such as investments, insurance, and annuities. Confident Planners know how much money they’ll need in retirement, and understand the concepts of budgeting, risk tolerance, and asset allocation and the financial solutions that can help to get them there. Make a commitment to get educated.

Get the Solutions You Need: In order to move from concerned to confident, individuals should own a diverse and appropriate set of growth and protection solutions. Confident Planners own a spectrum of products (mutual funds, stocks, bonds, retirement plans, and insurance) that they know will help them achieve their financial and life priorities — with no significant gaps. Document what you own and why you own it, and then look to your plan to find out where you might have gaps.

Find a Strategic Partner: Having a reliable, go-to resource is a major factor in having financial confidence. Confident Planners are more likely to have a strategic relationship with an advisor that they trust to be their financial coach, offer strategies to generate retirement income, and help them create a holistic financial plan.

Anyone can become a Confident Planner. It may not happen overnight, but it can happen. Education and adoption of key model behaviors can improve overall financial and emotional well-being, and help anyone go from concerned to confident. And that’s a resolution worth keeping.