Importance of Financial Wellness

Manage HR Magazine | Wednesday, June 08, 2022

The underlying concept of financial wellness is financial security

FREMONT, CA: What's financial wellness?

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Financial wellness is defined as the overall financial health of an individual. As researchers claim, financial wellness is how one manages their economic life. As financial wellness increases, so should the quality of life. There are a lot of variables that go into what makes up financial wellness. Just like every other aspect of life, everyone’s financial journey is different. But one thing is undeniable: everyone deserves to feel financially secure. At the end of the day, financial wellness is essential to holistically improve one's mental fitness.

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Why is financial wellness important?

Attaining financial wellness gives a sense of financial security and freedom. It means a person might not have to worry about a sudden emergency, job loss, or career change that might impact one's finances in the short term. It might mean less stress, more time with family and loved ones, and more meaning and purpose in one's career. Research shows men understand money better than women. This gap in financial literacy can be attributed to inequity in how women succeed in today’s world. Getting financial education is imperative to understand what it means to be financially well.

Steps to attain employee financial wellness.

Living paycheck to paycheck: One of the pitfalls of millennials is their tendency to live paycheck to paycheck. They tend to exhaust their salary in the first few days, which hampers their way of living in the latter part of the month. This tendency also prohibits them from making any savings. The company must make their workers aware of scheduling their salary for the whole month. It means dividing the money equally moving along the month. Here, the 50-30-20 way can be of great help. Here, the workers can spend 50% of their earnings on their daily utilities for the month, 30% on their daily expenses, and save 20% for a rainy day. It will enable employees to prepare and allocate their finances better.

Emergency funds: Having emergency funds is crucial for every individual. To attain this, one must have the golden habit of savings. Encourage the workers to save a portion of their income every month. It is also helpful to divide that saving into two halves. One for emergencies and one for personal financial needs use like a car, capital, etc

Proper investment opportunities: Investment from an early age is an excellent habit. While savings are significant, investments are a smarter way to increase wealth. By making sound investments, one can sit idle while the investments work themselves to create more wealth. As such, workers should also be aware of suitable investment opportunities in their capacity.

Debt Management: Debt is yet another aspect that troubles one's financial well-being. Here, one must be sure to pay off every debt, but the workers should prioritise these debts as well. The ones bearing a higher rate of interest should get priority. This means paying off the debt with higher interest first and paying off the whole amount as soon as possible.

Tax Advantage: Though taxation is a legal and moral obligation of every citizen, it is a very costly affair. Depending on the salary bracket, the workers can be paying around 10% to 30% tax on their income. It is a vast amount that can be better utilised to pay off debt, contribute to savings, or invest. Fortunately, there are many ways wherein workers can get tax advantage legally. The company must advise them to talk to agents and find out these ways. Some of these can be tax deductible on loans, certain investments, etc.

Employee financial wellness is a crucial aspect of overall employee health. Here, though this is a very desirable aspect, only a handful can attain it. By asking this handful, it can be said for sure that their secret is proper knowledge, initiative, and execution.

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