Financial wellbeing: What it is, tips and why it’s so important

By Sally Mathews

Whilst money may not be everything, being financially secure, whatever life throws at us, is important. How we use our money also contributes to our quality of life, personal happiness and fulfilment. Financial wellbeing focuses on what aspects of your life you value the most and how your money can help you attain your life goals. It is not just about saving more money or making more money!

What is financial wellbeing?

Financial wellbeing is about meeting essential living expenses including rent or mortgage and household bills, having a suitable emergency fund and identifying the most appropriate ways to save to meet future goals such as buying a house. All of this also has to be balanced with ‘fun’ money. How do you like to spend your time? What hobbies and interests do you have? Do you like going on nice holidays? All of this costs money and guilt free fun is not optional! It is the fuel to keep us all going with our financial plan and adds colour to our lives for a better work/life balance.

Why is financial wellbeing at work important?

Money worries can have a negative impact on our mental and physical health and impact on the quality of our performance and productivity at work.

A business which supports employees’ financial wellbeing can improve company culture, relationships between staff, decrease stress levels and absenteeism. This will make your company a happier place to work and put staff in a positive state of mind. A happier and more productive workforce will also have a positive impact on the end user – the people who use your company’s services and the quality of the experience they receive.

Life events such as an interruption to your income (job loss), serious ill health or death can all present a serious threat to you and your family’s financial wellbeing which could be devastating. Having a plan in place (including workplace life assurance benefits) to cover such events is extremely valuable and will provide you with peace of mind at all times.

How to improve financial wellbeing

1. A clear path to identifiable objectives

An awareness of what you want to achieve and what you need to do to work towards this. In terms of financial goals, you will also need to understand how you are able to fund this from your own resources. It is not unusual for us all to have conflicting goals and with finite resources, it is not always possible to meet all of these, in your preferred time frame. Working out what is most important to you will help you to prioritise, and budget accordingly.

2. Ability to cope with financial shocks

“Life happens when you are busy planning something else”– John Lennon. Having a suitable emergency fund to fall back on at all times will improve your financial resilience if you suffer an unexpected interruption to your income or if unexpected expenditure arises. Having appropriate life insurance in place can also help safeguard you for loss of income in the event of serious illness and make provision for your surviving family if you were to die, particularly if they are heavily reliant on your income.

3. Clarity and security for those we leave behind.

Have you discussed what would happen with your loved ones if you die? Let’s be honest, dying is not something you particularly want to think about. However, ‘dying tidily’ can help your loved ones during what is an already distressing and emotional time. Do you have a valid will to ensure your intentions are carried out and your money and personal items of value end up in the right hands? Is it easy for your loved ones to find important information without having to wade through masses of paperwork and clutter?

4. Control of daily finances

If you have ever experienced fear about your finances, budgeting will provide a road map. Budgeting = awareness and who doesn’t want that? Active awareness of what you have coming in (your income) and what you have going out (your expenses). If we don’t have a budgeting plan in place, we will have endless debates in our head about what we should spend or whether we should spend and if so, when? This can all be very draining and cause anxiety.

5. Having financial options

If you are not happy with how things are, could you make changes to improve your lifestyle? Could you change your career, even if this meant accepting a lower income, without affecting the quality of your life now and in the future? If you are not on track for meeting your financial goals, could you change your spending patterns to prioritise what is most important to you? Do you have savings you could call upon to help out with short term cashflow issues? Are you able to retire sooner than you originally imagined whilst maintaining financial wellbeing now and in the future? Could you work for longer, to achieve more of your goals?

How to measure financial wellbeing

There are various ways in which employers are able to measure the financial wellbeing for their workforce.

1. Employee questionnaire

Employee questionnaires may sound simple but asking employees about their mental health and money with a simple questionnaire will show them you actually care. You can include some information on the steps they may have already taken to cover the 5 key parts of financial wellbeing. This way, as an employer, you can help prevent a problem before it arises, identify where people are struggling, and what you as an employer may be able to do to help.

2. Impact on productivity, retention and absenteeism

This will require the business to monitor absenteeism and high turnover of staff including stated reasons via return to work interviews or exit interviews. Do lots of people take sick days (which can be because of stress caused by money issues). Do you have an understanding of your employees when at work and their productivity levels? What support can you put in place to improve matters. As previously mentioned, high levels of stress can impact on the quality of their work or relationships with other staff.

3. Employee financial benefits uptake

Do you have a handle on the take up of benefits amongst staff? If take up is low – this may be because of their lack of understanding or awareness of available benefits, or some benefits may not be suited to their needs. This could also be covered in your questionnaire.

It is equally important to take a look at any benefits the employee does have in place and if they cover finances. From this it could be determined if an employee is struggling with money. For example, if a business has childcare benefits and employees are taking this up, it could be because they have money worries.

How can we ensure the financial wellbeing of our employees

Here at Paradigm Norton, our People team operates an open door policy where you are encouraged to book a 1-2-1 to discuss anything that is worrying you.

Regular 1-2-1’s with line managers are also in place with a big focus on personal wellbeing, not just workplace personal development and performance..

Support is in place for new staff to explain workplace benefits (along with refresher sessions for existing staff). This includes how each benefit may be relevant based on an individual’s circumstances.

We regularly sign-post employees to external resources such as an employee assistance programme. This could also include services such as debt counselling and legal services for wills.

We take part in Financial Wellbeing week each year to raise awareness about the value of long term financial planning. As part of this, we offer individual pro-bono ‘drop in’ sessions to the general public (and staff) to provide guidance on financial wellbeing and budgeting.

What is financial wellbeing
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This article is distributed for educational purposes and should not be considered investment advice or a recommendation of any particular security, strategy, or investment product.