The Power of Budgeting

If your employees really understood the power of budgeting, they would always utilize a budget in their lives. Why? Because creating and using a budget helps employees reach their financial goals in manageable ways. Budgets are a tool that employees can create and constantly tweak to meet their financial needs and desires.

When employees determine where they want to spend their precious paychecks before they actually spend them, they effectively take control of their money. When employees assign what amounts of their money they want portioned to housing, transportation, food, entertainment, savings, etc., they pre-determine how they will use their money to best meet their needs and desires. For example, if an employee knows he/she wants to accomplish a specific financial goal, they can establish a “goal” section of their budget. That employee can then budget to save $X amount each month towards that goal. He/she can anticipate meeting the goal and get excited about the goal, as he/she saves toward their goal. Whatever said employee is “sacrificing” to save for will be easier if he/she has established an achievable goal. 

Budgets are meant to be fluid and adapt with employees' ever-changing goals. They are tools allowing employees to plan for and enact their individual financial desires. Their power is two-fold: first, in the utilizing of employees’ financial goals for establishing their budget and second, in using their budget to guide their daily financial decisions (and transactions). Employees budgeting money before they spend it puts them in control of their finances. Budgeting allows employees to determine where they want their money to go before it goes anywhere. If your employees are looking to be more disciplined and intentional with their money, a budget may be the key. Employees who feel in control of their money are more engaged and productive at work, which is a win for you and for them. 

Our tools and coaches can help your employees with a personalized budget. We are here to serve you in helping your employees decrease financial stress and experience greater financial wellness.

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Financially Fit Employees

Employee's Partners Impact Financial Decisions

Your employees’ money management tactics are impacted by how they and their partners manage their financial decisions. These financial decisions thereby directly impact employees’ work productivity, engagement, and even loyalty to your company.

Will employees and their partners agree to set up automatic withdrawal into your company’s 401k plan(s)? And if so, will it be only a minimum amount needed to receive any employer match or will it be closer to maxing the saving dollars? Will they contribute to Roth IRA plan(s)? And if so, how much? The same goes with any HSA savings plan, will employees and partners just barely contribute or save the annual max allowable. That’s just with savings. Your employees and their partners also get to negotiate how much they are willing to pay for rent/mortgage payments. And will they have a car payment or save and use cash to buy a car? Will they carry a credit card balance(s), etc.? Each dollar your employee and their partner spend somewhere is assigned to something and cannot be re-spent. Much like their time, once they have used it, it is gone.

As a little background, each of your employees have incorporated one set of financial values into their lives, while their partners have incorporated their own set of financial values into their own lives. These financial values are undoubtedly markedly different from one another. To some degree, these differences are inevitable as each individual is raised in different families, thereby incorporating the financial values of those who raised them. These values are literally infused into their lives as each person grows up within their environment. Some of those financial values serve your employees and their partners well, others not so well. Regardless, your employees and their partners find themselves a product of all these infused financial values in a committed relationship with someone else, who is also a product of their own infused financial values. Spoiler alert. There is rarely immediate harmony in differing viewpoints, especially when it comes to financial values.

It is beneficial to remember the influence your employees’ partners have on their financial decisions, which thereby also impact your employees’ productivity and engagement levels at work. It is important to consider these needs when selecting benefits for your employees. Look for programs that offer ongoing support to your employees and their partners to navigate the tricky process of using the income you are paying them in order to accomplish their joint financial goals together.

This process involves far more than just offering your employees 401k plans and HSA plans. What employees need before they can even really use these plans effectively is support and guidance in formulating individual and partnered/family financial goals of what they hope to accomplish. Employees and their partners need help identifying what their individual financial goals have been and now what their new blended shared financial goals have become. Then together they need help establishing bite sized steps that take them toward their newly identified goals. To be clear, this is a long process of repeated check-ins to help course correct and re-align to relevant and often changing goals. However, as you provide opportunities for your employees and their partners to engage in this process, you will find your employees will be more grounded and feel more content financially. This in turn translates into more productive, engaged, and loyal employees for you.

We’ve got your back,

Financially Fit Employees

Open Enrollment: HSA Plans

It’s that time of the year when employees have options to make changes to their benefits. One benefit to remind your employees of, if available, is your HSA plan. It is well worth it for your employees to take advantage of their Health Savings Plan (HSA Plan) if offered through your employee benefits’ package. The max allowed to save for 2023 is $3,850 for an individual employee and $7,750 for an employee and their family. If your employees are age 55 or older (and not enrolled in Medicare), they can contribute an additional “catch-up contribution” of $1,000 annually. Building up an HSA plan each month then allows your employees to pay for their medical expenses from untaxed money because the money goes into their HSA account pre-taxed. And if employees don’t need to spend it all on their healthcare expenses, then they can save it year to year and at age 65 can withdraw it to spend it however employees would like, without any penalties. The funds grow tax-free so they are never taxed! In this way, it becomes another “bucket” to save for both healthcare costs and retirement.

Even if employees can only save $1, $5, or $20 a month in their HSA account, that is $1, $5, or $20 a month they won’t be taxed on when they spend it for their healthcare needs - money that they will have to spend either way. FYI, if your employees want to set up a monthly contribution to max their 2023 HSA savings as an individual over a 12-month period, then they will want to plan to have an auto withdrawal from their paychecks for $320.83 a month to fund their HSA account. If paid in 24 semi-monthly pay periods that would be $160.42 per paycheck. If paid in 26 bi-weekly pay periods that would be $148.08 per paycheck. If employees want to set up a monthly contribution to max their 2023 HSA savings for their family (who is on your insurance plan) over a 12-month period, then plan to have an auto withdrawal from their paycheck for $645.83 per month. If paid in 24 semi-monthly pay periods, that would be $322.92 per paycheck. If paid in 26 bi-weekly paychecks, that would be $298.08 per paycheck. If employees are age 55 or older and not on Medicare, and want to max their additional annual “catch-up contribution”, then they can add an additional $83.33 each month (on top of their individual or family contribution). If paid in 24 semi-monthly pay periods, that would be an additional $41.67 per paycheck (on top of their individual or family contribution). If they are paid in 26 bi-weekly pay periods, that would be an additional $38.46 per paycheck (on top of their individual or family contribution). 

For 2024, HSA contribution limits will go up to $4,150 (a $300 increase) for individuals and up to $8,300 (a $550 increase) for family coverage. The 55 and older “catch-up contribution” will remain the same at $1,000. So, if you want to motivate employees to consider planning ahead for maxing out 2024 contributions as an individual contributor, employees will want to set up automatic contributions of $345.83 per month. If paid in 24 semi-monthly pay periods that would be $172.92 per paycheck. If paid in 26 bi-weekly pay periods that would be $159.61 per paycheck. If you want to motivate employees to set up a monthly contribution to max their 2024 HSA savings for their family (who is on your company insurance plan) over a 12-month period, employees will want to set up automatic contributions of $691.67 per month. If paid in 24 semi-monthly pay periods, that would be $345.83 per paycheck. If paid in 26 bi-weekly paychecks, that would be $319.23 per paycheck. If employees are age 55 or older and not on Medicare, and want to max their additional annual 2024 contribution, then they can add an additional $83.33 each month (on top of their individual or family contribution). If paid in 24 semi-monthly pay periods, that would be an additional $41.67 per paycheck (on top of their individual or family contribution). If they are paid in 26 bi-weekly pay periods, that would be an additional $38.46 per paycheck (on top of their individual or family contribution). Contributions to their HSA plan can help employees feel more on top of their money, as it allows employees to spend less (by using untaxed money) on their ever-growing healthcare costs. Let us know if you have any questions on how to talk to your employees about the option of an HSA plan. 

We’ve got your back,

Financially Fit Employees

Employees' Credit Card Debt Is a Hardship

 

Credit card debt continues to haunt many employees today and it's not expected to get better anytime soon. The Consumer Financial Protection Bureau estimates that credit card debt could even hit $1 trillion. Credit card interest rates often vary between 20.94% - 27.92%. To put this in perspective, if employees are carrying a $10,000 unpaid balance on their credit card that has a 27.92% interest rate, they are in essence really carrying a balance of $10,000 X 27.92% = $12,792. And employees are paying $232.04 in interest alone each month just to cover their interest payment. If an employee takes 30 years to pay off that original $10,000 balance, the employee will ultimately pay $73,781.24 (with only 12% of the employee's payments even chipping away at their balance and the remaining 88% devoted to interest). 

It's no secret that employees' financial stress spills over into the workplace decreasing work productivity. What can wise administrators do to help their employees? Create an environment that addresses employee financial stress and encourages employee financial wellness. Build a culture of celebrating employees working toward their financial goals, enhancing employee financial freedom by encouraging wise use of budgets to give each dollar from paychecks a specific purpose before spending. Consider putting an employee emergency savings plan in place to financially incentivize employees to prepare for rainy days. Make use of your company's selected retirement advisor and have them meet individually with your employees to encourage greater saving practices. Want more ideas? We are here to help you help your employees decrease financial stress and increase financial wellness (which in turn helps you have a more productive workforce). 

We've got your back,

Your Financially Fit Employees Team

The Wealth of Wellbeing

What does the word “wealthy” mean to you? Likely, what first comes to mind is money. But is this really what wealth means? Ultimately, it's up for everyone's own interpretation. But what does the population say? What do members of society think the word “wealthy” means? According to a Barron’s survey, 48% of their respondents said they considered themselves wealthy. But, when respondents were asked more generally how much money it takes to be wealthy in America, their responses averaged out to $2.2 million. This is nearly four times what the self-described wealthy reported about their own net worth. Why is this? Well, some describe it as the “wealth paradox”. At first glance, you may be skeptical of what this means or the term may come off as negative, but this may actually be good news.

This survey shows that people are considering more factors besides just money when defining the word “wealthy”, implementing factors of their well-being into their personal definition. Jonathan Craig states that “Americans today aren’t as worried about keeping up with the Joneses, and more importantly, they understand that they can be happier with fulfilling experiences and relationships, even if they have less money”.

Schwab conducted a separate survey to help find answers to this paradox. Below is a list consisting of the top responses from Americans when asked to respond to the prompt “What wealth means to me”:

1. Not having to stress about money

2. Enjoying experiences 

3. Being in good health 

4. Enjoying healthy relationships with family & loved ones

In fact, “Having a lot of money” was actually the tenth and last response on the list. Most importantly, what has been discovered is that wealth is more about not having to stress over money, as opposed to having more of it. The saying is true, Money can’t buy happiness. Wealth is more than just dollars. Having a lot of money clearly isn’t a bad thing, but if having a lot of money is the only thing you have, it is less likely you are living a very fulfilling life. When it comes down to it, well-being and having a balanced lifestyle is what's most important.

Well-being takes planning, direction, and routine. Being your own coach and motivator is beneficial, but reaching out to a trained professional may help set you up for the best success. Individuals taking accountability for their personal financial wellness can utilize Financially Fit Me’s features to get in contact with one of our qualified coaches for guidance on best skills and practices that make it easier to adopt effective routines, while Financially Fit Employees can help companies improve their employees financial literacy through services that  develop attainable financial wellness habits for work and home life. Offering such services to your team can increase their confidence and productivity, while establishing a stronger sense of loyalty when they believe you have their best interest in mind. 

We’ve Got Your Back,

Financially Fit

FinTech: The Next Big Thing

 FinTech Basics

Technology is becoming incorporated into almost every aspect of our lives. An article written by Columbia Engineering defines Financial Technology as the term representing software, mobile applications, as well as other technological advancements intended to automate and improve configurations of finance. Although it will be difficult for some to adapt to this style of living, learning how to acquire the proper knowledge and skills in order to utilize financial technology will be essential. A popular example of financial technology includes an app you may frequently use today. Venmo. Robinhood is another common application and trading platform that you may have heard of. It may seem as if financial technology is a new and recent finding, but the concept has actually dated back to the 1950s. This is when credit cards were first invented to the public for usage, and where fintech was introduced to the world.

How does FinTech work?

The goal of fintech is to ultimately streamline the process of financial transactions and eliminate unnecessary steps in order to optimize costs and accessibility. Some companies use fintech in the form of AI (artificial intelligence) in order to highly secure transactions in their internal network. In fact, today's fintech is primarily driven by AI, big data, and blockchain technology . These have all redefined how businesses store, transfer, and protect their digital assets. AI works by collecting data on consumers behaviors, therefore providing valuable information on their spending habits and allowing companies to better understand their customers . Big data analytics allows companies to predict changes in the market and create new business strategies powered by data (Columbia). Lastly, a newly introduced technology called blockchain, allows transactions to be dispersed without a third party’s opinions.

Learning FinTech

There are many fintech boot camps available for people who are looking to gain knowledge and experience in the area. Bootcamps offered by Columbia Engineering are particularly structured in order to provide hand-on experience for students possibly interested in a career in fintech. Most colleges also offer degrees with a concentration or focus in fintech as it is a growing industry. Free online courses are also available through multimedia apps and digital guides. This form of self-teaching may be ideal for those desiring an autonomous learning experience. Just keep in mind that time management and organization is essential in order to optimize self-teaching courses.

Programming, Cybersecurity, AI/ML, Data Science, and Blockchain are all important skills to acquire when accustoming oneself to fintech. There are an abundance of jobs and career opportunities in the world of fintech, and the median pay for a financial analyst was $83,660 in 2020 (Columbia). In fact, the field is expected to grow by 5% by 2029 according to the Bureau of Labor Statistics (BLS). You can also access financial fitness tools on our website in order to jump start your journey to success.

Getting Acclimated

It’s understandable that some people may not have their full trust in financial technology. Forbes states that 68% of people are willing to use financial tools developed by non-traditional institutions (Forbes). It is important to be careful when using financial technology, just like any other process involving money or personal information. If you are hesitant to use fintech due to safety concerns, remind yourself that the benefits generally outweigh the perceived risks.

We’ve Got Your Back,

Financially Fit

Financial Well-Being Mindset Shifts

People function and perform best when they have a clear, stable mind. Though unsurprising, this fact is much easier said than done. Accomplishing financial wellness and fulfilling financial goals will be hindered with anxiety-filled thoughts and insecurities surrounding all the jargon, skills, and secrets of the economic world you have yet to learn, potentially leading to poor financial decisions. So how can you prepare yourself  to make clear and concise financial choices? These decisions rely on a foundation of mental toughness.

As stated in Pan American Life Insurance Group’s article “10 Mindset shifts to improve your financial well-being”, Mental toughness is defined as being capable of controlling one’s thoughts and impulses, managing emotions effectively, and acquiring mental routines that promote productivity-focused behaviors. Fostering the tools to achieve the mental strength and ability to overcome financial adversity is something one will thank themselves for in the future.

There are a few skills that are essential when achieving mental toughness, like commitment, self-control, confidence, concentration, and pragmatism. The Pan American Life Insurance Group’s article provides 10 key aspects of financial stress which are listed below. These mindset shifts discussed in this article will allow one to overcome and better manage high-stress financial situations.

Key aspects of financial well-being include:

1. Be open to change and don’t close yourself off from new experiences.

2. Establish a budget. Having a budget will make you more aware of your expenses.

3. Access risks and watch for things that will hurt your long term success.

4. Only spend money on things you need and save money where you can, weigh your wants and needs.

5. Don't waste energy on things out of your control and only put energy into things you have power over changing.

6. Stop caring what others think. Comparison is the biggest thief of happiness.

7. Act according to your values and be consistent and stick to your word.

8. Set goals and let motivation guide you and look forward to achieving success.

9. Delegate responsibilities you can not manage and assign tasks to others that you are not able to complete on time. It’s okay to ask for help.

10.  Be content with what you already have and be grateful for your past achievements & how you got to where you are now.

These financial skills will enable you to make more confident financial decisions that will positively impact several other aspects of your life. The author of the article provides 7 aspects that financial experts use in their own lives in order to set themselves up for success.

Key aspects of developing mental fortitude in one’s personal life include:

1. Honesty

2. Continual learning

3. Emotional stability

4. Accepting others success rather than envying

5. Be prepared to win

6. Be prepared to lose, consequently

7. Think for yourself

Financial hurdles can be stressful and intimidating, but working towards mastering these skills will be very beneficial to one’s wellness and success overall. Start your journey today.

We’ve Got Your Back,

Financially Fit

Saving Accounts: Which One Is Best?

 Getting Started

Making any financial decision requires a great amount of thought, effort, and knowledge. Opening a savings account is a great start in order to set yourself up for future financial success, but what type of savings account is best? Deciding what types of accounts to open can be difficult and overwhelming if one is not equipped with the proper knowledge.

Interest Rates on Accounts

“These 2 savings accounts have interest rates of about 5%: Here's which one you should choose” says, “The average interest rate of a checking account is 0.6%” (CNBC, 2023). Making the decision to move this money from a checking account into a savings account may be highly beneficial. You will not only be conserving this money for the future, but you will gain a much higher interest on your money. In this article, we will discuss two different kinds of savings accounts both with around a 5% interest rate. 

What are High-Yield Savings Accounts (HYSA)?

In his article “These 2 savings accounts have interest rates of about 5%: Here's which one you should choose”, Mike Winters states that the interest rates of High-Yield Savings Accounts are dependent on the state of the market, inflation, and changes in the Federal Reserve's benchmark interest rate. They are typically offered by smaller online banks or credit unions and possess higher interest rates. Looking for the highest interest rate is an important factor when searching for the best account, although there are several other factors you will want to consider. Specific accounts may have a minimum balance requirement, contain limits on withdrawals, and perhaps even come with specified maintenance fees. You will want to weigh your options and choose the account that will fit your demands and needs best.

What are Certificate of Deposits (CDs)?

CDs (Certificate of Deposit), also known as Time Accounts, are accounts that do have a fixed rate over a specified period of time. According to Winters, They also typically offer higher interest rates at about 5% compared to the average 4.5% that High Yield Saving Accounts do. This term is guaranteed, and can typically span over six months to five years. The two different types of CDs are long-term and short-term; with long-term CDs having slightly higher interest rates. 

Considering this information, CDs sound like the obvious choice when it comes to choosing between the two types. But here's the catch:With CDs, you are required to fully commit and lock in to the entirety of the designated term. If you want to withdraw money earlier than the fixed term, you will be charged a fee worth several months interest on the balance.

Choosing an Account for You

A High-Yield Savings Account may be right for you if:

• Require immediate access to your funds

• Will need to access emergency funds (three-six month funds)

• Unsure of when you will need the money

• Comfortable with knowing interest rates have the power to fluctuate up or down

A Certificate of Deposit may be right for you if:

• Know exact timeline of when you will need your funds

• Planning for a downpayment on a future home or car purchase

• Have a savings goal that matches duration of the CD (this will maximize your return on interest)

• Example: A 2-year CD with a predictable return rate & planning to send your child to college in 2 years

The Bright Side of Both

Altogether, both High-Yield Savings Accounts and CDs are considered to be low risk investments, safe, and insured by the FDIC (Federal Deposit Insurance Corporation) for up to $250,000 per depositor. Additionally, there is no risk that your money will decline in value like it does have the potential to decline with stocks or bonds.

We’ve Got Your Back,

Your Financially Fit Team

Money and Happiness

Many people believe that having more money leads to greater happiness, while others argue that money cannot buy happiness. While there is definitely a relationship between money and happiness, it is hard to say if more money does, in fact, lead to a greater level of happiness. 

First, let's define what we mean by happiness. Happiness can be described as a positive emotional state characterized by joy, contentment, and satisfaction. It is a subjective experience influenced by various factors, including genetics, personality, life circumstances, and environmental factors.

Now, let's turn our attention to money. Money is a medium of exchange used to purchase goods and services. It is often seen as a symbol of wealth and success and measures one's financial status. People often believe that having more money will lead to a better quality of life, and therefore, greater happiness.

So, does money actually buy happiness? In an article published by PennToday, research suggests that there is a relationship between money and happiness, but it is more complex than many people believe. Let's explore some of the ways in which money and happiness are related.

Basic Needs and Financial Security

One way in which money can contribute to happiness is by providing for our basic needs and financial security. Having enough money to meet our basic needs, such as food, shelter, and healthcare, is essential for our well-being. We cannot live a healthy and fulfilling life without these basic necessities. Financial security is also important for our mental health and well-being. Knowing that we have enough money to cover our expenses and plan for the future can reduce stress and anxiety.

According to the National Institute of Health, research has shown that people who live in poverty or struggle financially are more likely to experience negative emotions such as stress, anxiety, and depression. Therefore, having enough money to cover our basic needs and achieve financial security can contribute to our overall happiness.

Material Possessions and Status

Another way in which money can contribute to happiness is through material possessions and status. Material possessions such as a house, car, or vacation can bring pleasure and enjoyment into our lives. Additionally, having a higher income can provide a sense of status and social recognition, which can boost our self-esteem and confidence.

However, the relationship between material possessions and happiness is not straightforward. Further research discussed in The Atlantic has mentioned that the initial pleasure and excitement that comes with acquiring a new possession tends to wear off over time, and we quickly adapt to our new level of wealth. This phenomenon is known as the "hedonic adaptation" or "hedonic treadmill." Essentially, our desire for more material possessions and status increases as we become accustomed to our current level of wealth. This means that the satisfaction we get from material possessions tends to be short-lived, and we are constantly striving for more.

Furthermore, the pursuit of material possessions and status can lead to a "keeping up with the Joneses" mentality, where we compare ourselves to others and strive to have more than those around us. This constant comparison and competition can lead to feelings of envy, jealousy, and dissatisfaction. Therefore, while material possessions and status can contribute to our happiness to some extent, they are not the key to long-term happiness.

Time and Experiences

A third way in which money can contribute to happiness is through the time and experiences that it allows us to have. Having more money can provide us with more opportunities to pursue our passions and hobbies, spend time with loved ones, and explore new places and experiences. Another article published by Forbes discussed research conducted by San Francisco State University "found that people who spent money on experiences rather than material items were happier and felt the money was better spent." This would include spending money on experiences, such as travel, concerts, or dining out, which tends to bring more lasting happiness than spending money on material possessions.

Furthermore, having more money can allow us to have more free time, which can contribute to our happiness. Time is a valuable resource. Money may not buy happiness, but sometimes, it can help alleviate the financial troubles we are faced with in times of need and desperation.  

Here to Help, 

Your Financially Fit Team