A person’s job obviously affects their financial situation. But what about when their financial situation affects their job? Money IS important, and not managing it can affect employees’ health and performance in far-reaching ways.
So, how can employers really help their staff improve their financial well-being (other than giving them raises, of course) without resorting to cliched advice like bringing lunch to work or skipping that daily double-foam soy latte?
How Financial Stress Affects Wellness
More than 70 percent of Americans report feeling stressed out about finances at least some of the time, and 22 percent report their financial stress levels hit eight or higher on a 10-point scale.
Unfortunately, this stress is taking a toll on employees’ emotional and physical health. A 2016 study found strong indicators that financial stress leads to cognitive decline. It can also lead to increased cardiovascular disease, insomnia, and migraine. And in an ironic twist, people under financial strain are least able to afford the medical care they need to treat those conditions.
Gary Tagtmeier, founder of the Financial Awareness Institute, has learned that many companies don’t know how to provide realistic and meaningful ways to boost their employees’ financial wellness. So, when planning out the financial health component of a wellness program, here are some useful goals you can share with your employees:
1. Map It Out
Before employees can ask for help with securing their financial future, they must know where they stand financially. That can be overwhelming, especially if they’ve never considered where their money is coming from and going to. You can help make this easier by suggesting employees break down their finances into these categories:
- Assets—items of significance they own
- Debts—money they owe
- Sources of income—including employment and interest
- Expenses—everything from car repairs to weekend movies
Understanding the figures in each category, Gary says, is one of the best things employees can do to improve their financial wellness.
2. Set Goals
The next challenge is to help employees set short-, medium-, and long-term financial goals. And again, many people don’t know exactly what their goals are. Is it to save for a child’s college education? Pay off a large medical bill or a mortgage? Pay down credit card debt?
“Establishing goals is a critical part of the process,” Gary explained. “If you don’t know what your goals are, you won’t know where you’re headed.”
3. Decide Whether to Save or Pay Down Debt
When it comes to deciding whether to put extra cash into savings each month or to pay down debt instead, the decision is a personal one.
Some individuals might see a mortgage looming over their heads and want to pay it off immediately. “They want the peace of mind that comes with not owing anyone any money for the home—that it’s theirs, free and clear,” Gary explains. And once it’s paid off, they feel like they’re saving money every month when they don’t have to write a check out to the mortgage company.
But others opt for a different route. Although they might be paying 3% interest on their mortgage, they decide to keep that mortgage and instead funnel any extra cash into a mutual fund that has traditionally returned 7% or more, increasing their long-term savings.
Ultimately, either choice will pay off financially. The key is to have a plan and stick with it.
4. Make a Budget
It may seem simple, but ensuring that income is greater than expenses is often all it takes to get people on track to financial wellness.
Encourage employees to create an Excel spreadsheet with one column for regular expenses and one for their goal-driven budget. They can then play with the numbers to see how they can save money without drastically altering their lifestyle. They can even add a third budget column for “tight times”—like when a spouse becomes ill and can’t work, or a single individual loses their job—to identify opportunities to trim those expenses further.
“A budget doesn’t have to be too much more difficult than this,” Gary emphasizes. What makes it seem complicated, he says, is that most people have never been taught to budget. They just let spending happen, without much foresight. “But if you don’t have the numbers in the right places, it’s hard to get where you need to be,” he says.
5. Understand the Effect of Interest
Most people don’t understand the detrimental effect compounding credit card interest can have on financial wellness.
It’s easy to be swayed by the barrage of pre-approved credit card mailers offering 0% interest for six months, a waived annual fee, or thousands of airline miles. But what consumers aren’t noticing are the double-digit figures that interest rates often jump to after the initial interest-free period.
If there’s any good news here, it’s that credit card issuers are being more up-front about educating consumers on just exactly how long it’s going to take to pay off credit cards if they’re paying off just the minimum amount each month.
An interesting challenge to add to your wellness program? Ask all employees to completely avoid using their credit card for a 90-day period (unless necessary for things like booking travel). Many people may find that certain purchases are not quite so badly needed after all.
6. Become Educated
One of the biggest mistakes employees make is not having a general understanding about investments. Take their 401(k), for example. In most cases, it’s the largest asset on their balance sheet, but their allocation strategy might be based on the recommendations of family and friends, instead of a professional.
A major way in which this mistake manifests itself is risk: Employees approaching retirement hear of a “hot stock” from a friend, only to lose their life savings on a volatile investment. Or, young employees select exceedingly conservative investments due to warnings from their elders.
“When younger employees make conservative instead of aggressive investments in their 401(s),” Gary explains, “they’re walking away from potentially hundreds of thousands of dollars over the course of their careers.”
Although it may sound risky to put retirement money in the stock market, Gary reminds employees that since 1929, the stock market has trended upward. And even if there are some down periods, younger employees have more time to weather those blips in the market and take advantage of its eventual rebound.
7. Don’t Wait
Whatever their financial end goal, Gary offers this piece of advice to all employees: Don’t wait. They should take advantage of any financial offerings your company has—from 401(k)s to Health Savings Accounts to lunch-and-learns on financial topics. Even if employees feel like they’re too old to turn their finances around, there is always time to at least make tangible improvements that can ease financial strain.
Today’s employees need their employers to provide more than basic financial wellness opportunities to help them achieve their goals. A wellness program that teaches solid and attainable steps to financial wellness is a priceless addition to your company culture.
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