Some of your employees dream of being financially independent entrepreneurs, and others fantasize about retiring early, but all of them need financial wellness. Research tells us that 63% of U.S. employees are weighed down by financial stress. Their anxiety makes sense when you consider that, on average, only 47% can cover expenses during a break in employment, and 49% feel they’ll need to dip into retirement money early.
As a manager, you owe employees more than fair compensation. You owe them the skills and resources to make sound decisions with that salary.
Look at your employee’s health as a whole, including financial health.
Your employees’ financial health is grounded in real-world savvy. It involves making sound financial decisions, building good credit, avoiding debt, and saving for the future.
Rather than existing paycheck to paycheck, employees who are financially healthy budget ahead for expected expenses, such as gas, food, rent, and entertainment. They also set aside savings for unexpected events, like car repairs and medical bills.
This behavior does not just lead to financial wellness — it is directly linked to a person’s overall physical and mental well-being. Poor financial health equates to stress, and without financial mentoring, many of your employees deal with this anxiety over the long term.
When your employees achieve financial wellness, you can expect to see increased engagement, retention, and productivity in the workplace. After all, money problems keep employees awake at night and distracted on the job.
As employees begin to free themselves of financial stress, they can focus on personal and professional goals. With a boost in financial health equating to a boost in physical health, you can also expect decreased absenteeism and absence from healthcare costs.
Mentor your employees to become financially independent and maybe even entrepreneurs.
According to a recent survey, 90% of U.S. employees want to be their own boss. The freedom to pursue financial independence is enticing, but it’s also risky.
According to the Bureau of Labor Statistics, around 20% of businesses fail during the first year, while another 50% fail during the first five years. The top three reasons these companies flounder boil down to a lack of planning — they either fail to secure enough capital, thoroughly investigate the market, or build expert teams. As a successful leader in the business space, you can mentor them past these common pitfalls.
Before they take the plunge into entrepreneurship, send them off with a clean bill of financial health by helping them develop a roadmap for success. This roadmap must include financial objectives, such as a year’s worth of daily expenses saved as a cushion, a realistic budget for their startup, and plans to continue health insurance and retirement.
Not everyone is cut out to be an entrepreneur. If you have employees interested in starting their own business, help them determine whether the move is right. Use your own journey as you help them understand the benefits and drawbacks of an entrepreneurial lifestyle, introduce them to every step in the process, and show them how to recognize the type of person who will flourish on this path.
Financial health enables your employees to prepare for retirement and even retire early.
A survey from Thriving Wallet reveals that at least 40% of employees are not taking steps to prepare financially for the future. We all look forward to retirement as a far-off dream, but as it draws closer, many find it intimidating. It’s not just about the loss of income; it’s also about losing purpose and identity. Mentoring your employees to prepare for retirement involves helping them achieve financial independence and teaching them valuable ways to contribute to the community.
To ensure your employees are ready for retirement, consult with them individually about their current financial situation, and ask them honestly about their plans for the future. As an employer and financial mentor, you can show employees how to set goals, save, and invest by introducing them to Roth IRAs, Traditional IRAs, and Health Savings Accounts — all of which offer different tax advantages.
Mentoring employees to achieve financial health is the first step in preparing them for retirement. Financial health isn’t only about having money in the bank today — it’s also about feeling confident in the ability to manage finances in the future. As employees learn to manage their money on a day-to-day basis, they grow into a position to make smart financial decisions, such as saving money, investing wisely, and planning for long-term goals like retirement.
However, some employees do not want to put off travel and passion projects until their late sixties. Instead, they may want to retire 10 or 20 years earlier which, while possible, takes a lot of work. To mentor employees toward early retirement, help them cut spending to bare bones and budget to see if this low-spending lifestyle will stretch through their extended retirement. You can also help them minimize taxes and maximize investments. Mentoring your employees to attain financial health is not easy, but the payoff is huge. As you take time to share your insight and instruction, you will find that financial wellness equates to happy, productive, and engaged employees who are excited about their futures.
Asim Hafeez is the Owner of Empower Energy Solutions.