Take control with a financial reality check
Posted: April 15, 2019 | Word Count: 693
Trying to make ends meet, dealing with credit card and student loan debt and paying unexpected bills while saving for retirement can be challenging regardless of where you are in life. It’s not surprising that personal finances are employees’ number one source of stress, according to MetLife’s 17th Annual U.S. Employee Benefit Trends Study (EBTS). Luckily, there are a few basic steps you can take to ease your anxiety and improve your financial future.
Planning is key
Contrary to what you may think, financial wellness has less to do with the size of your bank account and more to do with taking charge of your money. Simply put, it is three key things:
1. Having control over day-to-day finances;
2. Being able to absorb unplanned expenses; and
3. Creating a plan to fund future goals and then staying on track to meet them.
Perception versus reality
With today’s strong job market, tax cuts and household income gains, many employees are feeling confident about their personal finances, with over 63 percent reporting they feel this way. It turns out, however, there is a disconnect between perception and reality. Findings from the EBTS more fully illustrate the extent of the problem:
* Personal finances are the number one source of stress for employees
* 49 percent of employees report living paycheck to paycheck
* Only 50 percent of employees are directly allocating part of their paycheck to a savings account
* 30 percent of employees with a defined contribution retirement plan have dipped into it.
Many of us may prioritize the short-term over the future by inadequately budgeting, neglecting to save a portion of each paycheck, or dipping into retirement plans to cover immediate financial needs, such as credit card debt. These actions suggest an inability to balance unexpected costs with planning for the future, which are two key elements of financial wellness.
Separating myth from reality
Figuring out how to manage your finances can be overwhelming, especially if you are struggling to meet your daily expenses and facing student loan debt. Taking small steps now can make a big difference in the future. To start, it is important to dispel some popular misconceptions.
1. I pay all my bills, so I don’t need a budget.
Only 60 percent of employees have a budget or plan for how to spend their money on an ongoing basis. Budgeting helps you better understand your cash flow and enables you to free up extra money for long-term goals or big-ticket purchases.
Action: Whether you prefer a notebook, a spreadsheet or an online tool, put together a budget and stick to it.
2. That won’t happen to me.
Whether it’s a new transmission or a broken arm, things happen and, when they do, unexpected bills follow. The employee benefits you receive at work may be able to help.
Benefits such as life, disability and auto insurance can offer protection if the unexpected occurs. Voluntary products such as critical illness insurance, accident insurance and hospital indemnity plans can help address unplanned out-of-pocket medical costs.
Action: Investigate your benefit options and see what is available to you.
3. It’s too early (... or late) to save for retirement.
Just over half, 57 percent, of employees report being on track to achieve their financial goals. And just 31 percent are on track for reaching their retirement savings goals.
In your 20s, it seems like there’s plenty of time to build retirement savings. Conversely, as you approach 60, you may wonder if you’re too late. The truth is it’s never too early or too late to work toward a more secure retirement.
Action: Begin saving as soon as you start working and, if necessary, take advantage of catch-up contributions once you are over 50.
The key to building your financial wellness is remembering it’s a process that takes time, but working through these steps can decrease anxiety now and brighten your future. You may also want to investigate whether you have access to a financial wellness program at your workplace. As employees look for more help in this area, an increasing number of employers are offering resources, education and support.