This article was originally published on PES.
Wellbeing comes from having what you want.
This can be a problem. How do you know what it is that you want? Whether those ambitions and dreams are achievable?
Financial planning is not about getting wealthy – it is about getting happy.
According to ‘Wellbeing – The Five Essential Elements’ by Rath and Harter, wellbeing can be broken down into the following constituent parts:
It is essential to remember that wellbeing comes from a combination of these five areas. Too much focus on one area may be to the detriment of another. Too much time spent building wealth can have a negative effect on relationships, for example.
In their report Financial Wellbeing: The Last Taboo in the Workplace? In 2014Barclays suggested that we derive more financial wellbeing from having a savings buffer than we do from increases in income.
Much of their report – and a lot of the research since – focuses on the negative impact of employees who have financial worries. It seeks to enhance wellbeing by helping staff who are in financial difficulty. They suggest solutions such as debt management advice and tools to help manage budgets and outgoings.
This is, however, only part of the story.
Achieving financial wellbeing comes from a wide range of activities in addition to managing finances and getting help with debt. We can break financial wellbeing itself down into 5 categories.
Have A Clear Path To Achieve Identifiable Goals
Who knows what they want from their future? In the words of that Chinese proverb, every long journey must start with a small step. But in which direction?
Identifying our goals, understanding our drivers and motivations, is the first step in establishing a financial plan. The answer to the question ‘How Much Is Enough?’ will be different for each of us. Financial planners use cashflow forecasting to model potential financial futures. We can also use business coaching skills to help clients explore their dreams.
Most companies will have training & competence and appraisal schemes to help employees develop their career. If this career path were aligned to a financial plan built around a clear path to achievable goals, if the two were developed in tandem, the combined effect on wellbeing would be considerable.
Control of daily finances
Some of the tools already being offered to employees help manage daily finances. Identifying disposable income and not spending beyond that limit is a key plank in building financial wellbeing. Understanding what you are spending leads to detailed knowledge of what makes up genuinely disposable income.
Once this has been achieved, however, there is wellbeing to be gained from how that disposable income is spent.
Take Retail Therapy, for example, a concept that suggests there is wellbeing to be had by going on a spending spree.
Whilst there is truth in this (as long as the amount spend is within the disposable limits and not racking up debt, otherwise feelings of guilt would soon wipe out any wellbeing), it is limited. The wellbeing from purchasing goods is finite. Once that item has been used, worn, read or listened to a few times, the wellbeing rapidly diminishes.
Spending money on experiences, on the other hand, produces wellbeing in the form of memories which has much greater lasting power.
An employer can help staff enhance financial wellbeing by encouraging appropriate spending. This could indeed mean financial guidance and debt counselling. However it could also put in place options for alternative spending, such as links with a bespoke travel agency or perhaps tickets to events. My company sponsored a local orchestra for two years and encouraged staff to attend concerts.
Philanthropy, charitable giving, is another source of wellbeing. Having a company charity is another idea, perhaps one that the staff can give some of their time to as well as donations.
Ability to cope with a financial shock
The flip side of enhancing wellbeing is to avoid it being reduced. Simply by having a financial plan goes a long way to avoiding financial shocks, for example by creating emergency funds as a priority.
Preparing for them could mean providing life assurance or medical insurance. However, do staff really understand or appreciate the benefit you are giving them? If the nature of the benefit is not properly explained the opportunity to enhance wellbeing will be missed.
Another potential financial shock is significant changes in the stockmarket. Understanding investment risk is a complicated subject. Under the new auto enrolment pension regime many employers have dispensed with the financial adviser. High commissions on the old plans meant the advisers would sit with staff and discuss such issues, but now that this has to be paid for by a separate fee many employers have chosen to give information out in writing instead. This has lost a significant potential source of financial wellbeing for employees.
To be able to have options in life
There is no doubt that options and therefore wellbeing increase with wealth, however the rate of increase plateaus once subsistence income has been reached. Once you have all you need, no amount of extra money will increase your wellbeing.
The very process of producing a financial plan – a clear path to identifiable goals – will in itself bring about clarity over options.
By challenging our self limiting beliefs it is possible to discover more options. , perhaps through coaching. However – it is impossible to challenge yourself. Providing professional coaching for employees is one way to generate more options and therefore enhance wellbeing.
To ensure clarity and security for those we leave behind
Clarity for loved ones can come from establishing a financial plan. This will not only provide a clear path for the future, it also ensures that others know of your intentions. It can also build security for example by identifying and preparing for financial shocks.
Legal advice can also provide clarity and security. An employer can give access to workplace advice, for example for writing a will.
Providing access to advice and guidance is certainly a great start in promoting financial wellbeing in the workplace, however the construction of a financial plan can give wellbeing in all the different sections. If employer4s align this with other policies such as their appraisal processes then they can really provide wellbeing in the workplace.
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