Aristotle wrote, ‘Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it insures the possibility of satisfying a new desire when it arises’, stressing on the importance of money. Money is an important tool if you want to meet the daily household expenses and also fulfil your family’s needs. Therefore, you spend your life trying to earn enough money to fulfil all your needs. How often are you successful in your endeavour?
Frank A. Clark said, ‘Many folks think they aren’t good at earning money when what they don’t know is how to use it’. He was right in his sentiment. Earning money is not important. What is important is how you use your money to your advantage. Management of your finances determines your financial wellness. Are you financially well or do you struggle with money?
What is financial wellness?
Financial wellness is the measure of your financial health. Being financially well means being in control of your finances and having a sound financial plan at your disposal. This financial plan would not only help you meet your expenses but also come handy in times of emergencies and ensure that your life goals are aptly fulfilled. Many organizations define financial wellness as the process of learning the successful management of financial expenses.
Many of us might consider financial wellness similar to that of financial literacy. However, these two terms are not synonymous and have certain significant differences. Financial literacy is the knowledge about the basic financial concepts and the skills which are necessary for day-to-day life. On the contrary, financial wellness is a state of having a good financial outlook and is a measure of the overall health of an individual’s financial life.
Why is financial wellness important?
Dave Ramsey said, ‘You must gain control over your money or the lack of it will forever control you’. This is the whole essence of financial wellness. It shows why financial wellness is important. If you don’t control your finances and make them work for you, your entire life would be spent in financial worry and you would live under constant financial stress.
It is age-old thinking that if you earn more your financial health is good. But it is not always true. You need to manage your money so that it works to your advantage and improves your financial health. The importance of financial wellness can be understood from the following points –
- It helps you live a worry-free life.
- You can bond with your family and fulfil their needs and wants easily
- You can be more productive at your workplace thereby building a reputation for yourself which helps you get promotions and performance incentives
- An emergency would not cause you to panic and become desperate. You would be able to calmly handle a financial shock and tide over the rough patch easily.
- Mental disorders like anxiety, stress, depression, etc. would be at bay
- Your retirement would give you the time to fulfil your dreams without worrying about your finances
- You can leave behind a legacy for your family
- Lastly, you can live in the prime of health with a healthy lifestyle free from financial worries
What is personal financial wellness?
In literal terms, personal financial wellness is the financial wellness of an individual. When you take steps to become financially healthy, you are said to be practising personal financial wellness.
Personal financial wellness usually consists of four major elements which can be described below –
The feeling of control
Those people who have good financial health tend to have a feeling of control over their day-to-day and monthly finances. These people tend to pay their bills on time and do not have to worry about having enough money or not.
Capacity to absorb a financial shock
Personal financial wellness also includes the capacity to absorb a financial shock or financial crisis. This can include either a car accident or being laid off from a job temporarily. In such situations, the individual would have safety provisions such as savings, insurance or investments which would help absorb the financial loss suffered.
On track to meet the financial goals
Another important element of personal financial wellness is the ability to make provisions for future financial goals and meet such goals easily when the time comes.
Flexibility in making choices
Individuals having good personal financial health enjoy financial freedom which allows them to make choices for enjoying life. This can be taking a family vacation, going out to dine, spending more time with family, etc.
There is financial flexibility by which individuals can do what they value the most and what makes them happy. In other words, this can be said as having a sense of financial freedom in the present.
Financial wellness tips – How to build a financial wellness plan?
Achieving financial wellness is not difficult if you are know-how. So, here are some basic tips which would help you build a financial wellness plan –
Prioritize goal setting
Before you embark on your journey to financial wellness, you need to list down your financial goals which you need to fulfil in your lifetime. Once the goals are listed, you need to prioritize them. Having a clear-cut set of goals, with their timelines, would help you plan for them financially. Some common goals can be the following –
- Short-term goals
- Creating a contingency fund
- Buying a car
- Buying a house
- Going on a vacation
- Long term goals
- Retirement planning
- Planning for the child’s higher education
- Planning for the child’s marriage
Inculcating the habit of saving
You cannot fulfil the goals if you don’t save towards them. Saving is very essential in wealth maximization and you should, therefore, inculcate a habit of saving in a disciplined manner.
The building of a budget
Budget can be said to be one of the most important tools which help in achieving personal financial wellness. A budget will allow in creating an expenditure plan and spending in a very sensible manner. With a budget, it becomes feasible to understand how to spend money and maintain a track that would help in achieving your financial goals.
Seeking guidance from financial advisors
Once all the aforementioned steps are taken, it’s time for you to create your financial plan. You need to assess the sources of incomes and the outflow of funds so that you know the amount of disposable savings. Then, you need to allocate your savings in various types of investment instruments to create wealth. Financial planning is an art where you need to know the best saving avenues which suit your risk profile and investment strategies. You also need to choose the avenues based on your investment horizon. So, you need expert financial advisors who would help you create a sound financial plan. Seek help and assistance from qualified advisors to create a foolproof financial plan which would help you achieve financial wellness.
What is financial wellness in the workplace?
Employers today give utmost importance to the financial health and well-being of their employees as it is rightly said that “a happy employee is a productive employee”. Financial wellness at the workplace can be said to be a situation or scenario in which the employees are financially healthy. They know how to manage their finances judiciously, how to spend money smartly, invest and even save money. Financial wellness at the workplace affects productivity in the workplace and employee morale. Hence, employers in recent times emphasize employee financial wellness.
When the employers are concerned about the financial well-being of the employees they tend to provide support to their employees in the form of employee financial wellness programs to achieve financial wellness at the workplace.
Let us check out some of the major reasons why financial wellness at the workplace is important
Increases productivity at the workplace
According to financial research reports, employees having financial problems get distracted from their professional tasks and spend a considerable amount of time worrying about finances. Ideally, this time should be spent on accomplishing tasks at the workplace thus leading to a decrease in productivity at workplaces.
Improves the physical health of employees
There has always been a connection between financial health and the physical health of employees. If employees can obtain financial guidance at the workplace it would help improve the employee’s financial wellness and also lead to the improved physical health of the employees.
Employee financial wellness surveys of various organizations state that there is an increased rate of absenteeism at the workplace if the employees are under any kind of financial stress. Financial education and support at the workplace would ensure employee financial wellness and thus reduce the absenteeism at the workplace also.
Employees want financial wellness at the workplace
Today all employees in an organization especially the millennial expect to have employee financial wellness programs at the workplace for obtaining financial guidance. Even the employees belonging to Gen X also prefer joining those organizations which provide good support in financial planning.
Clarification on confusing financial topics
With the help of employee financial wellness programs, employees can understand technical financial concepts and the solutions available to them.
Building loyalty of employees
Employee financial wellness assessments reflect the fact that employees especially remain loyal and prefer working with those employers who understand their financial needs and offer them good financial benefits.
Keeps employers competitive
Employee financial wellness programs are the best way adopted by employers to remain competitive in the market. To draw the best talents towards an organization the employers must design a recruitment strategy that should include the promotion of the organization’s employee financial wellness programs on a large scale.
How to achieve financial wellness at work?
To achieve financial wellness at the workplace, employers need to provide effective employee financial wellness programs.
For the design or preparation of a successful employee financial wellness program, employers can use the four basic key steps mentioned below –
Understanding the current financial health of employees
The main objective of this step must be to understand the financial health, the financial needs and requirements of the employees. In other words, the employer must try to take into consideration the temperature of the financial wellness of the employees.
Choosing and customizing the program
Once the employer is aware of the financial wellness needs of the employees, it should choose the most suitable employee financial wellness program. There are a lot of financial wellness programs available in India and the employer should choose a program which would fulfil the object with which the plan was chosen.
Once the plan is chosen, customization is needed. There is no ‘one size fits all’ approach when it comes to financial wellness programs. Each program needs to be tailor-made according to the needs and wants of the employees.
Drive employee engagement and participation
A financial wellness program would be successful only if employees engage and participate in the program with enthusiasm. It is, therefore, the job of employers to boost employee participation. This can be done through incentive-based approach for the employees to undertake the program. Moreover, awareness sessions should be held highlighting the importance and the aspect of the financial wellness program in the context of employees.
Measurement of the value
Only implementing the financial wellness program is not enough. Employers should also evaluate the value provided by the program conducted. This can be done through the Value of Investment (VOI) approach for the evaluation and improvement of the employee financial wellness programs. VOI can be used by employers to find out about the success of the employee financial wellness programs by taking into account various intangibles such as improved productivity, higher morale of employees, reduced rate of absenteeism, etc. This quantification of the financial wellness program’s success will help in creating deeper insights into the impact created by the workforce on financial wellness on business outcomes.
What is the exact meaning of financial wellness?
Financial wellness can be said as the ability by which the current financial obligations can be met along with the initiative to afford new opportunities.
Why are most of the companies adding financial wellness services to the package of employee benefits?
Many companies have realized that by helping their employees in learning financial wellness would be helpful in increasing the revenue of the company. Nearly 80% of the employees in an organization admit to the fact that their financial issues affect the productivity of the organization. They utilize the work time in dealing with their financial issues which affect employee engagement and the company's revenues. So, if the organization would help the employees in achieving financial wellness it would also be beneficial for the company's financial health.
Is it right to say that employees are expecting employee financial wellness plans as a part of an employee benefits package?
Yes, most of the employees while joining a particular organization keep financial wellness at the workplace a major consideration.
Are there any benefits obtained by the companies if they are adding financial wellness benefits into their employee benefits?
Yes, companies are obtaining various benefits like employee satisfaction, employee loyalty, and increased employee productivity and employee engagement by including employee financial wellness in the employee benefits.
Isn’t it that an organization is getting too personal with its employees by offering employee financial wellness programs along with the financial benefits package?
It might seem somewhat personal but it also conveys a very strong message that the organization is concerned about the well-being of the employees and this goodwill would be beneficial for the organization.
Is considering financial wellness at the workplace such important even when an organization is paying very well to its employees?
Yes, even if an organization is paying well to its employees; employee financial wellness surveys say that most of the employees always face some financial issues and experience stress due to these issues. So, the financial wellness plans are not only about the money rather organizations experience great returns in terms of employee satisfaction and performance if they introduce financial wellness plans for their employees.
How many organizations on average are including financial wellness programs into benefit packages?
Around 85% of the surveyed organizations are including financial wellness programs into the employee benefits packages.
Is it necessary to include employee opinions while the design of the employee financial wellness plan?
Yes, it is necessary to include employee’s input while the designing of the employee financial wellness plan as it would be helpful in personalizing the wellness plan and also employers can know the reasons if employees do not participate in the plan pro-actively.
How important is communication in employee financial wellness programs?
Communication plays an important role in saving the employee financial wellness plans. It is quite important to educate the employees about the benefits of the employee financial wellness plans so as to motivate them to participate pro-actively into the plans.
List some of the ways by which an employer can invest in the workforce's financial wellness initiatives.
Some of the common methods of implementing employee financial wellness plans can be by offering financial educational materials, offering access to budgeting apps, student loan assistance programs, sending out budget templates, lunch-and-learn programs on how to create a budget, etc.