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4 Questions About Risk We All Must Answer

This world is full of risk. Some risks are worth taking. Others are not.

Also, risk comes in many flavors and variations - physical, emotional, relational, professional, or financial.

In the financial world, we hear the talking heads associate “risk” with “return”. In essence, if we are 100% risk averse, we will experience very little opportunity for growth. However, we might be willing to take on large amounts of risk with the hope of large upside potential.

Well, not everything is black and white in this world, and people do not always act rationally.

Distilled down to everyday language…each of us has different goals, preferences, and fears.

Please understand, we’re not here to tell you or your employees what specific risks you should mitigate or what insurance policies you should own, but rather, we want you and your people to be well-informed, know the right questions to ask, and be able to put a plan in place that is tailored for you and your families.

Regarding financial risk, there are 4 critical questions that you and your employees should all have answered: 

  1. What if you get sued? - You’re right to be worried. There are over 100 million cases filed each year in American courts, and there are only 330 million people in the United States. You do the math. In less than 4 years’ time, there are as many court cases filed as there are citizens of the country. Conclusion…”Cover your assets!”
  2. What if you become sick or hurt? - This is an often-underappreciated topic. Take a moment to think through what next month would look like financially if your paycheck stopped. According to Bankrates Financial Security Index, only 39% of us have savings over $1,000. So, even needing to take just a week or two off without pay could lead to devastating financial consequences.
  3. What if you die younger than expected? – In our youth, we were invincible and would live forever. Now as adults with families we love and care for, it’s not unusual for us to begin contemplating, “What if I die before I ever get a chance to grow old?” Forgive me for being Mr. Downer here, but over 40,000 Americans died in car crashes last year alone! Add to that the risk of heart attack, stroke, cancer and so on. If you were to die unexpectantly, what would that do to your family financially?
  4. What if you need long-term care at some point? - The Alliance Health Policy research shows that 58% of men and 79% of women aged 65 and older would need long-term care at some point as they grow older; it’s expensive. According to Genworth, in ten years, the cost of one year of care will cost between $60,000 and $130,000. If we don’t have a plan for this, the assets we worked so hard to save and build will be wiped out, rather than going to your family.

If you want to learn more about how to help you and your employees manage risk, contact us at the Foundation for Financial Wellness.

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Out with the Budget; in with Alignment

Shame, guilt, and judgment have no place in the development of your employees’ financial well-being. Would your people rather I try to shame them into living on a budget, or would they rather we have a two-way conversation about aligning their personal values with their vision of a successful financial future? Yeah, me too.

Budgeting, debt elimination, and emergency cash are all foundational pillars of financial wellness. However, it seems everything we’ve heard from the talking heads on this topic falls in the “How” and “What” categories and runs right past the “Why.” The alignment of our thoughts and behaviors with our values creates the nearly magical place where our lives are carried out with purpose and intentionality. Once your employees find this untapped power source, the budget, debt elimination, and emergency cash will happen. And get this…they’re actually going to like it. They’re going to demand it! It’s no longer a best practice or principle. It’s a way of being that comes from their most meaningful reasons.

There are endless templates, software, and ideas on how budgets should be built. We have our favorites at the Foundation for Financial Wellness, but whichever your people decide to use, it must be a zero-sum budget. Meaning, you must “spend” every dollar on paper before the money hits your account.

Debt elimination is an interesting topic. We teach two types of approaches: 1) Mathematical approach, and 2) Behavioral approach. The mathematical approach would have you pay off your debt in order of highest interest rate (most expensive) to lowest. This is logical. The behavioral approach has you pay off your debt in order of smallest balance to largest balance. This is emotional. The emotional brain gets the chemical release quickly by knocking out the smallest first, then builds momentum by rolling those payments into the next debt item, and so on.

The vast percentage of people we have taught through the years prefer the behavioral approach, and for good reason. “The best approach is the one you complete!” Not to mention, it was emotion, not logic, that got us into the consumer debt, so likely, it will be the power of the emotional brain that gets us out.

Finally, the third component of the financial trifecta, is emergency cash. There is nothing sexy about this. Then again, there’s nothing sexy about an Ambien either, and it’s debatable which one helps you sleep better at night.

If you want to learn more about how to help you and your employees budget, eliminate debt, and build up emergency cash, contact us at the Foundation for Financial Wellness.

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Living a Life of Legacy

According to a study from AARP, 83% of Americans have at least some form or fashion of a plan for death. This is really a surprisingly high number given that somewhere around only 50% of baby boomers even have a simple will.

However, we pose a very different question...rather than asking what percentage of Americans have a plan for death, why aren’t we asking what percentage of Americans have a plan for living? 

A plan for living is called Retirement Planning...a plan for dying is called Estate Planning...combining them both is called Life and Legacy.

It’s critical for both employees and employers to define your purpose and the “why” before building your plan. Whether you’re selecting financial products (stocks, bonds, mutual funds, annuities, real estate, etc.) or adjusting your existing plan, setting an intention will alleviate stress and anxiety when it comes time to make a decision.

If you and your employees have a rock-solid purpose defined, then it will drive the design of your life and legacy plans because it will be all about your unique needs and goals. Here are a few key points for you and your employees to consider as you plan for a prosperous future.

1. Beware of the Silent Assassins- Taxes & Inflation!

Our financial lives can be broken down into 3 different phases:

  1. Accumulation
  2. Spend-down
  3. Legacy

Think of it as taking on the challenge of climbing Mt Everest. The Accumulation Phase is like the ascent, the Spend-down Phase like the decent, and the Legacy Phase is the stories told about it for years to come. For all phases, it’s important to have a tax balance approach. This means we’re paying attention to the tax consequences of our decisions today and in the future. Where are tax rates today in comparison to where we believe they will be in the future? Additionally, putting the money aside (aka savings) is the biggest hurdle, but once we do set it aside, can we really afford to put it under a rock for the next 5, 10, 30 years? The answer is no, and the longer the time horizon, the more important each percentage rate of growth matters. Don’t forget, use the Purpose – Planning – Product philosophy as your compass.

2. Daydream a bit – what will that first day of retirement look like?

Let that inner-child out right now and dream out loud for a bit. What does your ideal first day of retirement look like? What time does the alarm go off (or does it at all)? Where are you? What scene do you take in while sipping that first cup of retirement coffee? What will you wear that day; flip flops, boat shoes, ski boots, or are you barefoot? What color is your house, what’s the weather like, and who’s with you? How are you feeling?

Seriously, dream about it and write everything down. OK, this is fun and all, but what’s the purpose of all this warm and fuzzy feeling stuff? A budget- a retirement budget.

Hopefully, we’re already living by our budget now (if not, START today!) It is very difficult (and probably unrealistic) to build a retirement budget out of thin air and expect it to be accurate. Yes, our retirement budget is best built on the foundation of our pre-retirement budget. Some expenses will go away entirely, other expenses may go up (hopefully some fun ones!) and some new expenses that we’ve never had prior may need to be added. Regardless, the budget in retirement is mission critical. It should be aligned with your vision and values, and it becomes your playbook for what are hopefully the most joy-filled years of your life.

3. Start Talking

Share these dreams, plans, and wishes with those most important to you. For whatever behavioral and emotional reasons, we tend to suppress way too many of our feelings, visions, and desires around money. Take a few people out for coffee and share your new approach to building the life and legacy of your dreams. At bare minimum this means your spouse, your executor, your beneficiaries, your pastor, your financial planner, and your accountability coach. There are many reasons why this makes good sense. Just to name a few…take your executor to an Executor’s Boot Camp (offered through the Foundation for Financial Wellness) and get them in shape.

Additionally, it’s great to begin speaking these wishes into reality; your accountability partner will love to know what’s on your heart and help keep you on track. And one last one, would be the old load bearing truth of “If you want to master something, try teaching it.” As you begin putting spoken words to your heart-felt “why”, you’ll begin to find holes in your thinking, gaps in your assumptions, and misunderstandings from your loved ones.

Wouldn’t you rather work on these things now, rather than leaving it up to interpretation once you’re gone?

Employers and employees alike, if you’d like to learn more about creating life and legacy plans, please fill out the form below

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Is financial anxiety impacting employee productivity?

Money management is one of the biggest silent struggles employees could be facing. Because financial stress is often viewed as a personal matter, it is among the last reasons supervisors or managers consider for low employee productivity, but data proves otherwise.  The 2021 PwC Financial Wellness Survey interviewed 1,600 full-time employed U.S. adults, 63 percent say their stress about finances has increased since the start of Covid-19.  According to the survey, these individuals are twice as likely to take out a loan from their retirement or postpone retirement all together.  

As an employer, offering financial wellness programs enables employees dealing with money dilemmas to get the critical support they need for personal and professional growth.  

 “Creating a safe space for employees to share their experiences with financial management and learn real-world techniques to change behaviors as it relates to money not only improves the individual, but the workplace,” said Brent Hines, Chief Development Officer at The Foundation for Financial Wellness.  

The most valuable financial wellness program for any organization has the following criteria:  

*Bullet points*  

Foundation for Financial Wellness is an educational nonprofit that provides financial wellness courses and counseling to empower individuals to achieve their financial goals. Learn more about our employee programs.  

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When managing money goes over your head...

Who isn’t stressing over money nowadays? The truth is most of us are either in a financial crisis or just getting out of one. Financial anxiety is real and, at some point in our lives, happens to all of us.  

In fact, a recent study reveals financial anxiety among a majority of adult Americans was on the rise long before economic stress related to COVID-19. According to Global Financial Literacy Excellence Center (GFLEC) at George Washington University, 60 percent of the 19,000 Americans surveyed indicated feeling anxious when thinking about their personal finances, while 50 percent of respondents indicated feeling stressed when discussing their finances.  

As an employer or wellness practitioner, it is important to have solutions for individuals experiencing financial anxiety. PricewaterhouseCoopers’ (PwC) 2020 Employee Financial Wellness Survey shares insights about financial concerns full-time employees in the U.S. are facing. In that survey, 58 percent of the employees polled say they are stressed about finances, and 50 percent admit that financial stress has been a distraction at work. 

Take the shame out of financial anxiety 

Create opportunities for open conversations about money management and financial stress through one-on-one conversations or workshops. As an employer, the first step is creating a work environment centered on whole-person wellness where employees have easy access to resources that address issues related to mental health, including financial anxiety. Resources can include a certified wellness professional, life coach, financial course, or licensed mental health professional. These resources should be promoted in multiple areas of a worksite and internal employee communications as a reminder to employees that help is available, and they don’t have to suffer in isolation. 

Get creative about promoting financial wellness 

Some companies use corporate challenges to teach valuable lessons in financial management. The challenges can center around saving money (which group saves the most money bringing their lunch to work instead of going out?) or paying off debt. This a subtle approach to addressing primary financial challenges many employees are facing.  

Offer a financial wellness course  

Science and math are taught in school but where do employees go for financial education? The GFLEC study shows that reliable financial education does matter! Significantly fewer study participants reported anxiety and stress regarding personal finances if they would have received financial education. The most successful financial wellness courses are scalable and customizable for your employees or clients and presented over multiple sessions. Check out the courses Foundation For Financial Wellness offers to individuals and companies.  

Empower your employees with money management solutions from The Foundation for Financial Wellness. Learn more about our 5 Essentials for Financial Wellness. 

 

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Why Financial Wellness is Critical to Your Business Plan

As more employees are feeling the stress of an unpredictable economy, employers are leaning into the idea of a comprehensive financial wellness strategy. Offering customized courses to help employees think differently about finances is a win for workplace culture while offering multiple benefits for organizations.  

Employees are feeling anxious about finances  

Financial anxiety is probably one of the biggest secrets employees are trying hard to keep private. Unfortunately, the stress shows up on the job and impacts productivity. A 2020 stress survey by John Hancock cited 39 percent of those surveyed before the pandemic were feeling financially stressed. That increased to 63 percent during the pandemic with those feeling extreme financial stress – a triple increase from 8 to 26 percent.  

 Financial wellness programs offer employees an opportunity to acknowledge their challenges with money management and build customized solutions. With an adequate financial wellness program, employees gain more confidence in long-term financial planning and avoid common pitfalls that lead to large debt.   

There is a demand for financial wellness education 

According to the 2020 survey conducted by the National Foundation for Credit Counseling (NFCC), “78 percent of U.S. adults agree that considering what they already know about personal finance, they could still benefit from financial advice and answers to everyday financial questions from a professional.” 

The survey also revealed 1 in 4 U.S. adults would reach out to a professional non-profit credit counseling agency for assistance.  

A more productive workplace
Managing mounting financial debt impacts the workplace in multiple ways, including reduced productivity. The John Hancock Stress Survey shows 43% of workers spend at least some time on their personal finances while at work. Also noted in the survey, “Among those who worry about finances at work, close to half say their productivity would increase if they didn’t spend time at work worrying about personal finances.” 

A broader financial wellness program is a key element to reducing some of the work-related issues due to an employee’s financial anxiety. Other benefits could include a higher employee retention rate and an expanded pool of top talent.  

Among the many things revealed by the recent pandemic is that nothing is certain – and that includes financial security. Employers would benefit in the long-term with the addition of a financial wellness program to empower employees with the tools and knowledge to manage money today and into the future. 

Foundation for Financial Wellness is an educational nonprofit that provides financial wellness courses and counseling to empower individuals to achieve their financial goals. Learn more about our employee programs.  

 

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Phone: 855-672-9051
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