Why are so many employees struggling financially even though we’re in what is arguably the best economy in a decade? According to Ilyce Glink, syndicated financial columnist and CEO of the award-winning financial wellness platform, Best Money Moves, most Americans haven’t seen their incomes increase much, if at all, over the past 20 years. Meanwhile, the amount of debt being carried is staggering, particularly student loan debt, which is about $1.5 trillion.
How can we help? Shifting from human capital management (HCM) to human experience management (HXM) requires keeping the focus on employees as individuals and not simply as company assets. A key pillar of the SAP SuccessFactors HXM strategy is to make it easy for businesses to tap into the latest innovations, beyond SAP, to help our customers fill the experience gaps that matter most to their employees. Last month I posted a two-part blog series on how organizations can use financial well-being apps, such as those available on SAP App Center, to improve the employee experience. Read Part 1 and Part 2 of that blog. This month I wanted to share additional tips to help employees dial down financial stress.
There are four generations in the workforce today, Gen-Z, Millennials, Gen-Xers, and Baby Boomers, and each of them are worrying about money, wrestling with various forms of debt, trying to make mortgage and rent payments on time, while trying not to borrow against their 401k account.
Glink says there’s a better way to think about money. You don’t have to have all this financial stress weighing you down while it raises your blood pressure. I’ve asked her to come up with a handful of New Year’s Resolutions that will get your 2020 financial life in better shape, and set you on a straighter path for the new decade.
So, as we move into 2020, and everyone heads back to the gym and goes back on their diets, here are some personal financial resolutions you might want to make, especially if the global economy continues to slow:
- Bulk up your savings. According to the Federal Reserve Bank, 40 percent of Americans have less than $400 saved for emergencies. Having cash on hand in case the water heater breaks, your child needs to go to the doctor, or your car brakes need replacing will reduce your overall financial stress. So, make a 2020 resolution to save more, no matter how much you’ve already socked away. Save more in your 401k retirement plan, in an HSA, and in your checking account. Whether you’re buying a home this year, or just trying to pay all of your bills on time in order to boost your credit score, having more cash on hand gives you options.
- Pay down as much debt as you can. You’ll never feel financially secure (or even fully rested) if you’re in debt. So vow to focus on your debt repayment strategy, and be willing to make temporary sacrifices in order to get your debt paid down as quickly as possible. Keep this in mind: Every dollar of debt you prepay effectively earns you that interest rate on those dollars. So if you’re carrying credit card debt at 29% interest, every dollar you prepay effectively earns you 29% interest. That’s a heck of a deal.
- Track your spending. This one is easier than it sounds: Write down every cent you spend for a month. You are probably spending more than you think, and wasting dollars (not just cents) on items that don’t matter in the long or short run. For example, your $5 per day coffee habit translates into more than $1,800 per year. If you spend an extra $10 per day ordering food, that’s more than $2,500 per year.
- Get your docs organized. What do you want to do in 2020? Whatever it is, keeping your financial documents organized is a good first step. If you’re buying a house or refinancing in 2020, for example, you’ll need to be able to provide a lender access to those documents quickly. A lender may need to verify tax returns (especially if you’re self-employed), see bank account statements, divorce decrees and other items. Even if you are going to provide these in an encrypted electronic file, you’ll want to get those copies in one place so that when the time comes to apply for your loan, you’re ready.
- Ask for help. It’s hard to know how to manage money well, if you’ve never done it before. Simple things, like spending less and saving more, are great goals to have. But if you’ve never done it, it can be overwhelming – especially if you’re addicted to using a payday lender or borrowing from your 401k account to make ends meet. If your employer doesn’t offer a financial wellness platform that includes a large amount of objective content, ask for one. You should also talk with your 401k provider and see if there’s a free information session you can sign up for that will give you more insight into the basics of managing your money.
Remember this: Whether you hit your goal exactly by the end of the year is largely irrelevant. What you’re trying to build is a foundation of financial stability, with good money habits that will last you a lifetime.
To learn more about SAP SuccessFactors Human Experience Management Suite (HXM) tap in the HXM Digital Summit for on-demand webcasts, research, articles, and more. Learn more about Best Money Moves on SAP App Center.