- Financial wellbeing
- 6 minute read
This is the time of year when your employees begin to reflect on their financial choices while making goals for the year to come. Here’s how you can help your employees set motivational New Year financial goals.
As we move into 2020, it’s a great time to reflect. This is exactly what your employees will be doing as they mull over their financial wellbeing, where they would like to be this time next year and how they can get there.
Unfortunately, setting (and achieving) financial goals isn’t quite that simple. Habits become ingrained and hard to overcome. For some of us, the resolutions we set, financial or otherwise, can quickly become overwhelming. In fact, it’s been shown that most people officially give up on their New Year’s resolutions as early as 12th January. Not even a fortnight into January and our motivation wavers. We give in to the comfort food, to the after-work pint or an expense we can't justify.
Why is this a concern for employers? Why should your employees' personal struggles and their private lives have any bearing on your business? The reality is, no matter how determined or engaged your employees are, they're also human. They're subject to distractions and stress which keep them up at night and which, ultimately, affects their work performance.
When it comes to financial wellness, we know that 25 million UK employees are affected by money worries. Concerns over our financial situation affects everyone, across all generations. Millennials suffer constant money worries, which are impacting their job performance, while older generations fear for their financial wellbeing in retirement. Clearly, organisations need to step up and help employees in this area.
So how can employers realistically help employees set financial resolutions they will actually stick to? Here are tips on how modern organisations can practically help employees with their financial wellbeing.
Different life phases and different situations call for different financial goals
In all likelihood, you manage a multigenerational workforce. Before you help your employees to set financial goals, you must first be aware of the fact that money worries and financial goals will probably vary wildly from employee to employee, depending on their particular situation in life. Financial goals should align with the employee’s phase in life and what their priorities are.
Encourage your employees to focus on what they really want. For younger employees, their goals might be to pay off debts or loans. Some employees might be intent on buying a home or developing a monthly budget habit, while other employees will be more focused on retirement plans.
Encourage employees to set short, medium and long-term goals
It may be the case that your employees know where they want to be, but they have a hard time envisioning how to get there. In this sense, they have a clear long-term goal, but their short and medium-term goals are a bit more muddled. When this happens, it’s all too easy for goals to derail entirely and become pipe dreams. Breaking large goals into smaller, more manageable ones will help employees take control over their financial wellbeing. Employees will also enjoy a sense of satisfaction when they get to tick short-term goals off their lists.
If we take buying a house as an example, we can break this long-term goal up as shown below:
Short-term goal: Setting up an ISA and paying monthly contributions into this account.
Medium-term goal: Achieving the full deposit amount.
Long-term goal: Securing a mortgage, purchasing the home and moving in.
Employees shouldn’t set too many financial goals
Setting too many goals is one of the biggest goal-setting mistakes you can make. Employees might be eager to resolve and improve many areas of their financial life, but the reality is, employees only have a fixed amount of time. They're human and they can only achieve so much. Encourage employees to focus on what's important, to limit goals and to give these goals the attention they deserve.
Employees should make their financial goals SMART
SMART goals shouldn’t just be confined to performance management discussions. Being SMART about financial resolutions can help employees get to grips with their goals, while creating reasonable objectives they are likely to achieve, with enough effort.
SMART goals should be:
S — Specific and Stretching. Asking your employee to be as specific as possible about what they want to achieve this coming year will help to create a more concrete road to the goal while eliminating distractions. In addition, goals should be stretching. As Marissa Mayer, CEO of Yahoo, once said: "[Stretching goals] are the building blocks for remarkable achievements in the long term".
M — Measurable. Making financial resolutions measurable will allow your employees to track their progress and to understand what has been achieved, so that they can feel proud when they achieve the goal.
A — Achievable. There’s no sense in setting an unrealistic goal. This will only serve to stress out, frustrate and disillusion employees. Going back to our home-buying example, it might be achievable for a potential employee of yours to buy a house in the suburbs, but not so realistic for them to buy a mansion in the centre of London.
R — Relevant. Financial goals should be relevant to the individual and their phase of life.
T — Time-bound. Employees should have a target date where the goal will be completed. Not only will this provide a sense of urgency (which will encourage them to take steps to achieve their goal), but it will also help when it comes to reviewing whether or not the objective has been successfully achieved.
Provide financial education services
You can help your employees by leading the way to financial wellness. You might do this by hiring an expert financial education service, who are able to provide tailored education in your workplace, including ongoing support, which will give them the confidence and ability to make wise financial decisions. Such services can also provide e-learning facilities for employees and advice for every stage of life, including retirement. Financial education services and support can be extremely beneficial to employees who are particularly anxious about their finances.
Encourage employees to automate where they can
We live in a wonderful world of automation. Encourage your employees to make the most of it and to make life easier for themselves. Even if they have perfectly laid-out SMART financial goals and a detailed plan of how they aim to achieve these goals, mistakes can still happen. Automation can help in this area. For example, by automating savings, you can ensure a certain amount of money is placed from one account into a savings account each month, at the same time. This means savings take priority, and employees don’t simply save what is left at the end of the month.
Explore means of sticking to financial goals
To ensure employees are on track with their New Year's financial goals, they should track them regularly. At a minimum, we’d recommend once a month. This will ensure employees are aware of, and actively thinking about, their short-term goals. These are great points to reflect and re-evaluate where necessary.
Employees can use software or automated calendar reminders to prompt them to assess their progress.
Encourage employees to be kind to themselves — goals can be re-evaluated
Employees should remember that financial wellness is a long journey. Sometimes we’ll derail, sometimes we’ll make mistakes and sometimes we’ll wake up to the fact that what we believed to be an achievable goal was, honestly, a little unrealistic. Employees should be encouraged to be kind to themselves during this process.
All agile organisations are aware of the fact that fast-paced working environments often demand an alteration to company objectives and employee goals. It is for reasons such as this that annual appraisals are being replaced with continuous performance management. The more frequent performance discussions are, the more reactive we can be to market demands and the better able we are to adjust to pressing company obstacles. Similarly, employee financial goals should be revisited on a regular basis. Calculations should be re-run and changes considered to ensure the goals are still viable. Doing so will keep employees involved, engaged with their goals and motivated to achieve them.