What is Financial Wellness?
In very simple terms, financial wellness means the art of efficiently and successfully managing one’s economic life. Financial wellness is a combination of knowledge about your finances, making good financial decisions, and consolidating financial decisions into other important aspects of your life. Moreover, financial wellness means the capability of managing efficiently the short term finances and making preparations for achieving long-term goals simultaneously. Money plays a very important role in our lives and it has to be managed in a very wise manner.
The very simple concept of financial wellness encloses some of the below-mentioned major factors.
- Making a proper budget and spending according to the budget.
- Keeping a concrete track of expenses.
- Being prepared financially for any kind of emergency.
- Having a perfect plan for the future.
- Being well-informed about the information which can be used in making correct financial decisions.
Make Financial wellness a part of Employee Wellness
To begin with, employers need to understand just how critical financial planning is for overall workplace wellness and happiness. Unfortunately, money is not something we discuss at home openly or learn about in school or colleges and even in B-schools. Thus, when we have enough money, we don’t know what to do in that situation. Just the ways physical and mental wellness initiatives are playing critical roles in ensuring employees are happy not only at work but outside of work too, financial wellness programs can also be made an indispensable part of employee wellness. Here’s how:
- Organizations can tie-up with financial services firms that can handhold employees in educating and helping them understand their income and financial aspirations, and help create a viable long-term financial plan.
- These programs must take into cognizance that senior executives, middle management, and young professionals are at different life stages, income levels, and therefore, have different needs and challenges
- Aside from periodic interventions, helping employees plan for and save income tax can be an important event every year. Here too, hand-holding every step of the way, empowering employees with knowledge and actionable advice is vital.
Signs of Financial Wellness
Some of the major signs of financial wellness can be listed below such as
- Having sufficient money to meet the necessities.
- Being able to afford medical and health care facilities.
- Sufficient savings for post-retirement life.
- Being able to afford a good living standard.
- Complete control over one’s own financial situation.
- The level of financial stress is low.
Benefits of Financial Wellness
- Direct saving
- Independent Expert Banking assessment of the financial requirement and how it can be met
- Advice based on knowledge of the whole market
- Consideration of all options: PSB59min | CGTMSE Loans up to 5 CRORES
- Management focused on the business and not on the finances.
Basic Documents Required
- Owner KYC (Pan Card, Address Proof)
- Business Registration Proofs
- Bank Statements for latest 9 Months
- ITR, Financials for last 2 years
- GST Returns for last 1 year
7 Ways to ensure Financial Wellness
1. When reality changes, tweak Investments accordingly
If you still have not made peace with the fact that each day we’re inching closer to a recession, high time you do. This implies a future liquidity crunch coupled with high inflationary pressures. Investors are almost always advised to take a long-term view but in this situation, it is equally important to set up short-term financial goals. Investment decisions during this period should be made keeping in mind your short-term goals. The investments should be adequately liquid to address contingencies and short-term needs.
2. Study your Financial Records closely
Here are some tasks you need to prioritize and work towards:
- Create a will to ascertain rightful owners of your assets
- Prepare a balance sheet with your assets/liabilities, share it with someone you trust
- Appoint nominees for all your investments/bank deposits
- Keep your life and medical insurance policies handy and readily available. Share the details with immediate family members
- Take stock of all your loans, existing EMIs and create a backup plan to service the debt
Your financial plan should incorporate these above-mentioned tasks. Ensure that your financial documents are appropriately managed and documented. Moreover, your financial assets should come to your rescue, should the need for immediate funds arise.
3. Exercise Financial Prudence and Caution
The uncertainty around the pandemic calls for monetary tightening. Cut down unnecessary expenditures and excessive use of credit cards, these would only increase your liabilities. Figure out what is the bare minimum spending that is essential. Ensure timely payment of EMIs for existing loans and premiums for insurance policies. Use RBI’s 3-month moratorium on payment of term loans only as a last resort. During the moratorium, interest would continue to accrue and get added to the loan amount. So it is prudent for you to continue EMI payments as per schedule, so that the overall interest payable does not mount up substantially and the loan can be closed on time.
4. Create a Backup Plan
Fear you are next in line to a salary cut or job loss? Introspect and create a contingency plan to tackle this mishap. Re-evaluate your financial standing and capacity to service debts along with meeting necessary expenses. Investments could be redirected to liquid assets to avoid sudden cash crunch and the risk of being a financial defaulter. We often forget that such situations can strike anytime and entrap anyone, even us. Hence everyone needs backup. So keep a plan B ready to ensure regular income stream.
5. Check Insurance Status
The current pandemic has reiterated the importance of insurance in uncertain times, so opting for a life or health insurance plan is another prudent decision, if you don’t have one. If you are yet to pay the premium on life/health insurance for the financial year 2019-20, as per the recent relaxation by the government, you may pay the same by June 30, 2020 and claim tax deduction for this financial year.
6. Pay Essential Bills
If you are worried about being able to pay all your bills, prioritize essential bills first. Sorting through your bills and prioritizing them serves two purposes:
- As a budgeting exercise, it guides you to deliberately think through what you spend your money on. You may find that some bills can be eliminated.
- By knowing beforehand which bills you will pay first, you won’t have to scramble to decide if you do find yourself in a bind later.
Both of these outcomes will help reduce your financial anxiety, and hopefully allow you to sleep better.
7. Find ways to earn more Money
You can only cut a budget so far, and you’ll want to be careful that your tight budget isn’t a source of additional stress. Another way to ease some financial tension is to take steps to increase your income.
It may seem difficult to increase your income in the current economic environment, but it isn’t out of the question. The simplest way to earn more is to work a few extra hours each week if your employer will let you.
If increasing your hours isn’t an option, look for other ways to earn money. Some new unconventional ways to earn money may be available now because of the pandemic. For example, families with children who are schooling at home may find they have less time to take care of normal household chores than they did before. Many are willing to pay someone to do a grocery pickup, mow the lawn, help the children with online assignments or watch them while they attend school virtually.
4 Reasons why Financial Wellness is a Top Priority for Employers
Here are four key reasons why employee financial wellbeing is a top priority
1. Financial Wellness enhances the Overall Employee Experience
85% of employers are creating or expanding their financial wellbeing program in order to enhance the overall employee experience. An average employee’s 40-hour work week accounts for almost a quarter of the hours in their week. Enhancing the overall experience should be a top priority simply because it can enhance the life of an employee altogether by providing additional financial security.
2. Financially stable Employees are Engaged Employees
72% of employers cited increasing employee engagement as a reason to create or expand their financial wellbeing program. Additionally, when employees feel their employers care about their health and well-being, they’re 38 percent more engaged, according to a report by Quantum Workplace and Limeade.
3. Organizations that Invest in Employee Financial Wellness are more appealing places to work
If you make an effort to enhance the engagement and experience of your employees, your company looks more attractive to prospective employees. Employers generally understand this. In fact, 47% claimed they created or expanded financial wellbeing programs to differentiate themselves as an employer. Being able to offer a full range of benefits beyond the job description can help bring in the best talent.
4. The impact of COVID-19 has made the need for Financial Wellness more apparent
In 2020, almost 80% of employers increased communications about the retirement and/or financial wellbeing benefits that they provide to their workers. The COVID-19 pandemic has caused collective trauma among employees. Pandemic-related financial insecurity has taken a toll. Many employers recognize the need to uplift their employees and guide them through these financial difficulties.