Employers to help Workforce in Achieving New Year’s Resolutions
Authur J. Cummins
When you read the headline to this article I bet you thought the New Years Resolution we would be discussing is losing weight and becoming healthy. Am I right? While losing weight has always been and probably will always be among the top 5 resolutions every New Years, this article is about getting out of debt. That’s right, year after year, getting out of debt is of the utmost importance to many Americans. It’s up there with losing weight, spending more time with loved ones, quitting smoking and drinking less alcohol.
It’s 2011 and companies all across our Nation are clearly embracing Corporate Wellness programs. Thanks to the efforts of the Wellness community, the connection between a healthy workforce and a company’s bottom line are more apparent than ever. An employee, who is in good health, will have more energy, and is bound to contribute more. This employee is more likely to have a better attendance record and contribute to a positive morale on the job.
What’s not as obvious to employers is the connection between an employees financial affairs and the company’s bottom line.
According to Dr. E. Thomas Garman there is an absolute connection. Garman is Founder of Personal Finance Employee Education Foundation or PFEEF. He has compiled numerous studies on the connection between financial literacy in the workplace and worker productivity. Garman has dedicated over twenty years studying and documenting the loss of productivity in the workplace and how employee financial stress is negatively impacting employers. Additionally Garman feels employers have a morale obligation to promote financial literacy to their employees.
Here’s one big reason for employers to listen up! It’s called Pay Satisfaction.
Another variable that has been studied in conjunction with financial distress is pay satisfaction, which includes such concepts as fairness of pay for the work being done, adequacy of pay raises, and perceptions of being appreciated by the employer. Garman reports that those with greater financial distress are less satisfied with their pay, regardless of the amount of money they make. Dissatisfaction with pay is a concern for employers as well as employees, as it could lead to increased turnover. Employee turnover represents huge costs to employers in the form of recruitment, interviewing, training, and other expenses.
Numerous studies have been conducted on the correlation between heath and personal finances. So let’s begin by acknowledging two basic facts:
- One of the greatest contributors to medical problems is stress.
- One of the leading contributors to stress is Debt.
Regardless of your sex, income, or marital status, your personal finances play an important role in your health. Individuals who manage their money well are less likely to be physically influenced by finance related stresses. However, individuals with poor money management skills, particularly those who carry high balances on credit cards are often physically, emotionally and mentally drained by their financial burdens.
For example, according to a recent survey reported in USA Today, distress over financial matters is contributing to irritability, anger, fatigue, and sleeplessness for over 52% of Americans. Every day families are running harder and harder to stay in the same place economically while others are trying to reduce the amount that they are falling behind. Millions of these people carry their distress about financial matters into the workplace where it reduces employer profits. According to another study recently published by Aimee D. Prawitz and E. Thomas Garman, when financial distress spills over into the workplace, it contributes to a lower commitment to the organization, work time wasted dealing with personal finances, absenteeism, and poorer health. The same study states that employers need to recognize that at any given time, in every workplace, part of the workforce (typically 15-30%) is seriously financially distressed.
So the million dollar question is why are so many people struggling financially? More specifically, why has debt become such a problem in this Country? I came up with 4 main reasons.
Reason #1, Human Nature
Keep in mind that in this day and age, rarely does any problem exist due to a lack of information. The internet and libraries are full of free information on the importance of good nutrition, diet and exercise. Despite this fact, obesity is a greater problem today than at any time in the past. Does that make any sense? The problem with books, CDs, and seminars is that they do not adequately address the underlying problem people face on a day to day basis, and that’s a lack of self discipline. Take a look at your own bookshelf. How many books have you purchased with the best of intentions, hoping to change or implement something new in your life only to find your stubborn old habits slowly but surely winning out over the promise of making that positive change? Of course I’m not implying there is not tremendous value in reading; there is. I am however saying when it comes to changing ones behavior; it is very difficult and is rarely achieved by simply reading a book.
Reason #2, The culture we live in
The culture we live in today does not help. Today we demand immediate gratification in just about every area of our life. That includes buying stuff! If there is room on my card, and I really like it, chances are I will buy it. Too many people are trying to keep up with the Jones’. We are buying things we don’t need, with money we don’t have, to impress people we don’t like. This week I walked into Best Buy and saw that I could walk out with a new HD TV for $29 per month. Oh, and no payments until 2014. This certainly exacerbates the problem and is bad news for those who lack self discipline.
Reason #3 Inflated Real Estate Values
Over the past ten years, real estate values increased rapidly and steadily creating instant equity in many people’s properties. What’s worse is the equity in those properties were very simple to access thru equity loans. Homeowners were essentially using there homes like an ATM machine. This enabled us to live lifestyles that were not commensurate with our real income. That was fine and dandy until equity lines were frozen by the banks.
Reason #4, Paradigm shift is needed for Financial Professionals.
This picture represents everyone’s personal economy. The flow coming in from the top represents our income. The water in the bucket represents our assets. And the flow coming out the bottom is interest payments. According to the book entitled Money Momentum the typical American family spends on average an astonishing 34.5 cents of every dollar earned on some form of interest payments. Those are hard earned dollars flowing out the bottom of the bucket in interest payments, never to bee seen again.
A full bucket equals a healthy financial situation. Everyone would agree that our goal is to fill the bucket and keep it full, right? The question is how.
While we all agree our goal is to fill and keep full our bucket. The advice we receive from Financial Professionals is fragmented and many times conflicting. Of course Sutton’s Law is entirely responsible for this dilemma. The law is named after the bank robber Willie Sutton, who reputedly replied to a reporter’s inquiry as to why he robbed banks by saying “because that’s where the money is.” If you ask your CPA, what’s most important, he is likely to emphasize tax deductions. Your insurance agent will tell you, insuring what’s in your bucket is most important. Stock brokers and other financial advisors will tell you improving your yield and proper asset allocation is most important. Some say it’s all about maxing out the 401k. All these professions are well established and highly qualified and financial products and valuable information in these areas is quite available. Whether fee based or commission based all the above advisors and planners are compensated well to sell their products and/or services. Remember…While there is nothing wrong with it; “That’s where “their” money is”.
Where there is “no money”, (at least for these established professions) is showing you exactly how to close the hole in your bucket. In my experience, regardless of your income level, this is the real problem today, and it’s a really big problem. The bottom line is, as long as there is 34.5 cents of every dollar draining out the bottom, you are going to have one heck of a hard time filling your bucket. Period! Unfortunately, financial professionals receive no formal training on how to help their clients in the area of debt elimination. Even if they did, until recently there have been virtually no debt related products to offer clients anyway.
Now for the Good News!
There are companies springing up who have identified the growing need to specialize in “how to close the hole in the bucket”. Debt elimination is a new and exciting emerging industry. There are some excellent and innovative products coming on the scene to help families alleviate the massive problem of debt. If you are an employer reading this, I highly recommend you seek out a company that will help you help your employees, once and for all get on the path to being debt free. What should you look for when choosing a company?
Having spent the past 24 years in the financial services industry and having worked with hundreds of families in the area of financial planning, I would recommend you look for the following.
There are 3 critical components any debt elimination program must possess for it to be successful long term.
- The program must be simple to follow. The simpler the program, the greater the likelihood of long term success. Any plan that requires an excessive time commitment is doomed to fail.
- There must be immediate gratification on some level. The sooner someone can experience cause and effect as it relates to his spending habits the better. For example, if someone would like to create a “what if scenario” that asked; if I stopped spending that 5 dollars a day at Starbucks, how would it affect my long term debt situation. This feature can be fun as well as motivating. Also, programs that allow the client to know exactly when they will be debt free are the best. Again, finances are a lot like diet and exercise, you better see some results or it’s very easy to get discouraged and go back to old habits.
- There must be adequate and ongoing coaching and support available. There’s going to be a learning curve and some questions with any program, no matter how simple it is. Having the ability to pick up the phone and speak to a live person is priceless. The coaching element can be the determining factor in the success of the program.
Financial Health must be the cornerstone to every Corporate Wellness Program. Be careful not to confuse companies who are simply selling investment and insurance products with a good financial wellness program. Offering employees financial products they can’t afford will only be frustrating for everyone. The program you choose should include an educational and coaching component. It should be easy to use. And most of all it should focus on debt elimination. Get you employees on a program like this and tell me what your company looks like this time next year.
About the Author
Arthur J Cummins, CLU, ChFC has worked in the Financial Services arena for the past 24 years, during which time he has represented the New York Life and NYLIFE Securities.
Arthur received the distinguished designations of Chartered Life Underwriter (CLU) through rigorous studies in the area of business insurance, retirement planning, life and health insurance and tax planning techniques. He also received the prestigious designation of Chartered Financial Consultant (ChFC) which includes study in financial planning, wealth accumulation, estate planning income taxation, business taxation planning and investments.
Arthur has hundreds of clients located all over the United States. His clients value his knowledge of financial products and appreciate the emphasis put on the planning process verses the sale of financial products. He shows a seasoned understanding of high net worth individuals, successful professionals, employee benefits, small-to-medium-sizes business owners, and corporations.
In approximately 2004 Arthur noticed a disturbing trend as it relates to “Traditional Financial Planning”. It was not working! The average family’s debt load was skyrocketing. Arthur recognized that traditional planning approaches did not address debt concerns whatsoever. Arthur observed that most “planners” concentrated on investing assets that came through the front door while completely ignoring an ever increasing percentage of a family’s budget that is going right out the back door in the form of interest payments.
In 2006 Arthur was invited to join CFO/Simple. This award winning debt reduction service is now the cornerstone of his business. Most recently he has dedicated his practice to working in the area of Corporate Wellness introducing his web based smart software as a voluntary employee benefit.
The founders of CFO Simple were recently awarded the Ernst & Young Entrepreneur of the Year in 2008 in the financial services category for the western region. The award honors the most outstanding entrepreneurs who inspire others with their vision, leadership and achievement.
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