There’s a Steep Price for Neglecting Financial Wellbeing

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We have meaningful metrics that we can use to quantify our physical health. We need to treat financial wellbeing the same way.

personal finance

By Matt Mormino, CFP®       

It is critical to define what financial wellbeing is before beginning any conversation about why it is or is not important. Financial wellbeing has varied meanings, and it can mean something different for everyone. At its core, financial wellbeing is living within your means, and learning to manage finances for both the short and long term. Through a mix of education and action, now and into the future, you can set yourself up for financial security and peace of mind.

Unfortunately, a number of statistics reveal the troubling state of personal finance in America. A 2017 PWC survey found that nearly one in three employees report that money issues have been a distraction at work, and 46 percent of those employees spend three hours or more at work each week thinking about or dealing with personal finances. A majority of employees (53 percent) in the same survey confided that they are stressed about their finances and are more likely to miss work and cite health issues caused by financial stress.

Nearly one in three employees report that money issues have been a distraction at work.

A 2012 Health Affairs article noted that employees reporting high stress are $413 more costly per year on average than those not at risk from stress. As a point of comparison, smoking has been found to raise health care costs by $587 on average. Is financial stress as bad as smoking? Well, no, but it’s not too far off.

We need to look at financial wellbeing through the same lens that we look at all wellbeing. We have meaningful metrics that we can use to quantify our physical health, like cholesterol and body mass index (BMI); there are intangibles that we strive for like energy; and there are strategies that we can use to achieve results, like diet, exercise, and supplements or medication. We need to treat financial wellbeing the same way. We can use metrics like retirement readiness and knowing if an individual has a will in place; we can look at intangibles like confidence and low stress; and we can implement strategies like education, access to professional services, and tracking tools.

Still, individuals are unique—not all metrics are created equal. At 5’ 11’’, Seahawks quarterback Russell Wilson has a BMI of 28.7, which is classified as overweight. Maybe that’s not the best metric for him. Actor Zooey Deschanel suffers from celiac disease. She probably shouldn’t include whole grains as part of her diet plan. Similarly, unique circumstances will dictate what drives financial wellbeing. For many employees, getting a budget in place and eliminating debt is the key to success, but for others it may be necessary to go deeper, bringing in more complicated topics like tax or estate planning.

The first place to look for financial education is your retirement plan. More and more, 401(k) record keepers are building libraries and tools to help plan participants learn about financial topics, and many offer virtual and in-person training to help employees harness this knowledge. Learn what resources are available to your company, and then demand more!

How can we customize and personalize the way employees engage with financial education? An algorithm won’t do the trick.

401(k) retirement plan advisors, like the Brighton Jones Institutional Asset Management team, have a key part to play as well, and not just in providing investment education—though that is obviously a key component. The truth is that education alone cannot relieve stress, and in some instances can actually increase it. If we think of financial wellbeing as a stool with three legs, where one leg is education and another is financial resources, the third leg is personalization. How can we customize and personalize the way employees engage with financial education and other resources? How can we harness the power of that education and those resources to drive financial wellbeing? An algorithm won’t do the trick.

Baby boomers grew up without the dizzying array of technologies at their disposal, but that doesn’t mean that they are alone valuing human interaction. A 2017 Vested report called the “Millennial Money Study” noted that the millennial generation, despite being digital natives, wants and prefers in-person customer service. Whether you have a company full of recent grads or empty-nesters, human interaction is craved across the board. Enter the financial advisor: ideally, an objective, experienced individual delivering comprehensive advice as a fiduciary. However, many people don’t have the time, the resources, or the inclination to engage with an advisor, and if they do, often end up in narrow and conflicted situations.

What if employees could access to qualified resources through work, lowering the barrier to achieving financial wellbeing? The key to any retirement plan advisor relationship is trust, and the best way to instill trust is through a personal referral or recommendation. Management championing the benefit and vouching for the professionals can propel a program to great success.

Whether it is through a retirement plan, or separately through an employee benefit program, providing a qualified, conflict-free, and dedicated resource (like a specific advisor) or set of resources (like an advisor referral network) that can help guide employees through their unique situation, creating the confidence and the plan that will deliver true financial wellbeing. This lowers stress and decreases distractions at work, which will increase outcomes not just for the individual, but the business as well.

You can start your people on a better path toward retirement right now by sharing our series of Financial Wellbeing webinars with your colleagues.

Matt Mormino, CFP® serves as an advisor at Brighton Jones.

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