Habits that Matter: These 4 Financial Wellness Practices are Good Medicine for Worried Workers
May 22, 2018

Habits that Matter: These 4 Financial Wellness Practices are Good Medicine for Worried Workers

By: Susan Kinzler

We’ve reached an economic milestone in the U.S. There is now a job for everyone who wants one. And with a record 6.6 million unfilled positions in the U.S. labor market, competition for qualified workers has heated up.

This sounds like great news for working Americans – and there’s more. As CNN declared earlier this year, “America finally got a raise.” It’s the 9th year of economic recovery since the Great Recession ended in 2009. Finally, even wages are beginning to pick up across many industries and locations.

So why aren’t workers feeling more financially secure? Consider this: nearly half of employees say that financial challenges cause them the most stress in their lives. That’s way ahead of stress over their jobs, their health, or their relationships. And for the large majority, financial stress levels have increased over the past year. “Stressed employees are found to be less productive, take time off from work to deal with their finances, and are more likely to cite health issues caused by financial stress,” said Kent E. Allison, Partner and National Practice Leader for PwC.

Financial wellness as a gateway to total rewards

Employees who lack financial wellness are less likely to take advantage of other existing benefits, finds Healthstat client and banking partner, BB&T. As employees gain better control of their finances, they can also participate in other company benefits. This may range from investing in a 401(k) or 529 plan, to accessing tuition reimbursement or discounted fitness programs, for example. Having the financial wherewithal to access these benefits, in turn, improves employee satisfaction, employee engagement and loyalty. It’s in this way that financial wellness helps employers fulfill the intent of a total rewards package designed to attract and retain employees. The employer becomes the employee’s financial home, where they find crucial benefits for health, education and retirement. This progress toward life goals is far bigger than a simple paycheck.

Creating healthy money habits

Habits become our destiny. Healthier habits today set us up for a healthier future tomorrow. At Healthstat, we are experts in behavior change. Let’s look at 4 important habits for financial wellness, recently delivered to Healthstat’s own employees by Merrill Lynch. Bringing financial planning seminars or meetings with a financial advisor into the workplace can be a great way to get employees started on the road to healthier money habits like these.

1. Setting goals and creating a budget

Goal-setting will bring financial wellness efforts into focus. Consider short, medium and long term goals. For example, a 1- to 2-year goal could be to set up an emergency fund or buy a car. A long-term goal of 10+ years would be to plan for retirement or pay off a mortgage. Setting a budget then helps to create a step-by-step plan for meeting expenses and financial goals.

Many people naturally bristle at the idea of creating a budget. They may not know how, they may not understand all the reasons a budget is important, and they may be unsure what’s on the other side once their budget is set. It’s important to communicate that even if an employee doesn’t like what they see when the budget is created, they need to know where they stand to take that first step toward financial wellness. Going through the budget process and organizing their money will help to create a sense of control. That sense of control will, in turn, help to alleviate stress.

The steps to creating a budget are basic:

  • Identify your income
  • Track what you spend each month by category (housing; food and personal care items; bills; credit card payments; and extras like entertainment, gifts and clothing).
  • Compare what you spend with your monthly net income, and then get to work looking for ways to save! 

Online tools make budgeting even easier, but the most important thing is to set goals and get started! If you currently use an online banking system, it may offer free budgeting tools that are convenient to access. You can also see a range of app options here

2. Building an emergency fund

The level of financial vulnerability among working, middle and upper-middle class people helps explain reports of constant stress. Just under one-fourth of adults cannot pay all their current month’s bills in full. Faced with an emergency expense of $400 or more, 4 in 10 adults couldn’t cover it, unless perhaps they sold something or borrowed money. And even those with insurance often forgo healthcare because they can’t cover the out-of-pocket expense.  While 23% of adults paid a major unexpected out-of-pocket medical expense in 2016, one in four report forgoing one or more type of health care in the prior year due to affordability. A 2017 Bankrate survey finds that Millennials are the most likely to skip necessary medical care because of the cost.  

Having an emergency fund is important for unplanned medical expenses, as well as unexpected home or auto repairs. It will help people avoid either going without, or paying interest and fees that are charged when using credit. To build an emergency fund, open a designated emergency account and start an automatic contribution plan. An initial goal for the fund, which should be separate from savings, would be $500-$1,000 in case of an emergency. But longer-term, there should be 3-6 months of regular living expenses for a single person with no children, or 6-9 months for a married person or someone with children.

3. Managing debt

Having debt is a sensitive subject. It can look a little different for everyone. Without debt, most Americans could not buy a home or a car, or afford to go to college. Debt is a financial resource, but it must be used wisely – and toward the fulfillment of a goal.

Debt should not be used for impulse purchases, nor as a replacement for an emergency fund. Finance charges on credit cards and some types of loans can quickly become overwhelming. Even at a moderate 16% interest, it could take 24 years to pay off a $5,000 charge if you make only the minimum monthly payment. And you could pay more than $13,000 for the original $5,000 charge. It’s a quick way to go upside down, and it’s easy to see how a debt consolidation benefit was found at the top of last year’s employee benefit open enrollment wish list.

Consider a case study highlighted in BB&T’s Promoting Employees’ Financial Wellness report. Following program participation, employees stopped requesting 401(k) loans, had fewer late payment charges on monthly bills, and reduced their installment debt. Employees themselves reported greater satisfaction with their financial situation, while supervisors said those participating in the program “had more energy” and a “higher engagement level at work.”

Merrill Lynch outlines two methods for paying down debt: the “snowball” or low balance method, and the high-interest method. In the snowball method, debts are listed in order of the amount owed, from smallest to largest. The strategy is to make the largest payment you can to the smallest balance each month. When you can pay a debt in full, you can cross it off the list. Crossing debts off your list helps achieve a sense of accomplishment, satisfaction and control.

The high-interest method, on the other hand, affords the satisfaction of attacking the debt that comes with the highest cost. This minimizes the amount of money that you see “wasted” each month in interest payments. The sense of control that comes from making debt more manageable can also provide ongoing motivation.

4. Saving for the future  

Why is work the best place to deliver financial wellness education? Because it’s where employees are asked to select from complex benefit and compensation choices that affect their lives present and future. We may not be able to simplify the tax code from the halls of Congress. But we can help employees understand how to use their benefits to save toward their goals and still take home enough money in their paychecks. And research shows that a financially capable workforce is more satisfied, more engaged, and more productive for their employers.

Recent news tells us that today, 401(k) participants are saving more than ever. And the Rand Corporation estimates 71% of Americans are adequately prepared for retirement. Wide gaps exist, however, by gender, marital status and education level.

Financial wellness programs can help employees understand the many savings vehicles available to them. It’s a crucial form of empowerment for everyone – and most especially those at highest risk of being caught in the gaps.

Launching your financial wellness program

Financial wellness is an important benefit that impacts employees and employers alike. But given the personal nature of personal finances, there are some additional considerations in launching new programs. BB&T recommends that employers proactively address privacy concerns among employees, as well as concerns among staff about the time and resources they may need to invest in program support. In addition, BB&T notes, “Some executives need reassurance the effort isn’t an attempt to micromanage employees’ personal lives but an important employee benefit that can be viewed as a supplemental form of compensation.”

To us at Healthstat, many of these concerns sound familiar. They echo concerns expressed when providing medical services and wellness coaching in the workplace. The first wealth is health, as Ralph Waldo Emerson said. It follows that financial literacy should be the next frontier after health literacy. We understand how to address these needs. And we are committed to serving employee needs across the domains of well-being, including physical, mental, social, financial and career well-being. Let us show you how our clinics can become centers for well-being, leveraging the power of the full range of employee benefits you offer.