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Working on ‘financial wellness’

Financial wellness: a nurturing process

We often hear of “financial literacy” being the current buzz words to help people understand their financial status. Yet does it cover the whole picture? No.

Understanding how pension funds and mutual funds work is important, but only highlights a small part of your overall financial wellbeing. Knowing how your car works is fine — but doesn’t mean you know where you are headed, or why. The mechanical aspect is one thing, but the purpose of the journey is critical.

You may spend days if not weeks or years heading towards your “future life” only to find that when you get there it’s not what you expected. “This is not what the brochure said!”

As such, a financial wellness programme is a much more comprehensive and worthwhile exercise.

A study this year by MetLife stated: “Financial wellness is the state of being in strong financial health so that individuals can successfully manage day-to-day finances, protect against unplanned expenses and financial shocks, and plan and save for future milestones.”

In other words, if you are currently in some form of financial distress you simply cannot bring the worry to the workplace. You can’t leave it on your own doorstep, go to work carefree, then pick it up again when you get home from work. It doesn’t work that way.

The emotional stress of not making enough money to cover your basic needs over and above the physical effect that you are tired every day from working and worrying is draining. That cycle of inner fear must stop. Easier said than done, you say? Not really.

Budgeting, saving and forward planning are all ingredients of a successful financial wellness programme. They are the foundations of a plan. Yet many people delay or completely ignore the budgeting process — the first step in the financial wellness routine.

For many reasons people hesitate to prepare a budget of their current income and expenses. Scared to discover they are already underwater and working on the principle “what I don’t know can’t upset me”. That is not a good idea at all.

Once the starting position is prepared and reasonable then the forward planning becomes easier. Hopefully you will have a good idea of what your income will be over the next five years or more, notwithstanding changing jobs or salary increases. Similarly, you should have a good idea of your expenses over the same time frame.

But financial wellness is more than arithmetic.

Your lifestyle is an integral part of your financial planning. You may feel that you will want to be in a bigger house in a few years, or need a new car, or start a family. These issues are lifestyle issues and while they are only feasible by having the necessary money, they nonetheless are life choices of a personal nature. In other words, you make the choice first then work out how to pay for it second.

The problem many people give themselves is to decide that a new house for example is a must-have, but they can’t afford it right now, yet they build the idea in their mind to a point where their inability to save for the new house becomes an obsession. Stress builds up.

This emotional roller-coaster is partially the reason why progressive employers these days are introducing financial wellness programmes for employees to address these types of dilemma. Employers who understand their employees’ concerns can introduce workshops or tutorials to help the employee.

The employer may not be willing to contribute financially through higher salary or a loan, but by bringing quality advice to the employee through budgeting and saving ideas, then the overall outcome is a win-win for both.

Satisfied employees who are treated properly by employers are more productive and less prone to seeking alternative employment or extra part-time work in the evening. Understanding the holistic nature of financial wellness is a much more valuable catalyst for peace of mind.

Identify your life choices over the next few years; know what your financial condition is today; then forward plan to be able to afford those life choices on a timeline basis. Solutions don’t fall out of trees. The tree must be planted and nurtured for years. Likewise, your financial wellness.

The next Olderhood/Butterfield Bank “Money Matters” workshop will take place on June 27, 2019 at Butterfield Bank from 5.30pm to 7.30pm. Register for free at http://bit.ly/2JFvVFa