As an Employee Financial Wellness Advisor and Certified Financial Planner, I often state the case that making financial literacy supports available to employees will help to lower employee financial stress. These supports in turn reaps benefits for the employer. (Read More Here). This is absolutely true. But I’ll hold my hands up as a guilty culprit on one point. Like many people, I sometimes speak about ‘financial stress’ as a given.
We often skim over this term as if we are all on common ground about what “financial stress” means and how we can empathise with it. But what exactly is it and how can it affect our wellbeing?
In this article I want to delve deeper into the problem of financial stress rather than the solution that companies such as my own offer in the form of Employee Financial Wellness Programmes. Read on to uncover some of the complexities masked by the occasionally flippant complaint of financial stress.
Financial Stress is a Real Condition
Financial Stress is not merely a case of too much expenditure and not enough income. If it were then we’d be living on a very stressed out planet.
The reality of financial stress is that it is a genuine condition that poses a threat to our overall health and wellbeing. In fact, research coming from America has identified a distinct disorder called ‘Acute Financial Stress’, which is said to have a lot in common with Post Traumatic Stress Disorder (PTSD).
Led by Chief Science Officer Dr. J. Galen Buckwalter, the Science team at Payoff claim that this affects 23% of Americans. According to their research, stressful financial situations cause negative impacts on thoughts, feelings and behaviours. These are the diagnostic criteria psychologists typically use to identify people with PTSD. They relate to financial stress in the following ways: • Thoughts: Financial stress causes persistent negative thoughts. We may, for example, dwell on past mistakes or think pessimistically about the future both personally and professionally. • Feelings: Financial stress causes feelings of fear, worry or regret related to financial matters. • Behaviours: Our behaviour can change as a result of financial stress. An example of this is avoiding social occasions or interactions in the workplace. • What Causes Acute Financial Stress?
According to Dr. Buckwalter: “AFS is a stress-related syndrome that occurs after our brains and bodies have experienced such severe and/or prolonged stress that we lose the ability to modulate even normal stress”.
In my experience as a Certified Financial Planner (CFP) I have witnessed people enduring both severe and prolonged financial stress situations. They fall mostly into 2 key groups:
1. SUDDEN FINANCIAL STRESS Unexpected Events and Circumstances Can Have A Detrimental Effect On Our Financial Situations. Examples Include:
• Long-term illness • Unforeseen medical expenses • Medical and Care costs for children or elderly dependents • Involuntary Redundancy • Funeral Costs • Capital damage expenses • Fall in share prices • Loss of investment
Ad-hoc scenarios such as these can effect financial stability in a number of ways: People lose out on income; drain their savings, or, worse still, borrow money to cover unexpected costs. While these are stressful incidents in their own right, they can, in turn, feed into more prolonged periods of financial instability and stress.
2. ONGOING FINANCIAL MALAISE This may occur as a knock-on effect of sudden financial stress situations. However, it can also be caused by consistent income/expenditure deficit and by the mismanagement of personal finances. For some people this could be a case of reckless spending and over dependence on short term lending such as credit cards and overdrafts. For others the issue may be more serious. It could, for instance, be a matter of insufficient disposable income in the wake of crippling mortgage repayments or escalating rental costs.
What Are the Symptoms of Acute Financial Stress? According to the Payoff study, the symptoms of AFS match up with the criteria required for a PTSD diagnosis. Those symptoms include: • Difficulty with sleeping • Feelings of isolation • Reliving past stressful events • Extreme anxiety • Guilt • Hyper-vigilance • Denial • Emotional numbing • Avoiding stress reminders
How Does Financial Stress Impact An Employee’s Performance At Work? Like all stress conditions, financial stress can have a negative impact on employees. This can result in: • Distraction • Lack of Productivity • Low Confidence and Morale • Lack of Energy and Motivation • Absenteeism How to Reduce Employee Financial Stress
There is no quick fix solution to alleviating stress. Moreover, in the case of financial stress it is entirely unrealistic to prescribe ‘earning more money’’. So what actions can be taken?
There are two. We can treat the symptoms of financial stress or we can treat its cause. I recommend both.
This means taking active measures to look after our minds and bodies: exercise, eating healthy, stress management, lifestyle balance and so on.
The second is to tackle our financial circumstances head on. A Proactive first step is to talk to a Financial Advisor.
Employers can help their employees by providing both health and financial wellness supports at work. What’s more, it’s in their interest to do so, because Employee Wellbeing has lots of positive impacts on companies.
I hope you found this article useful. If you have any tips or comments you want to share on financial stress please do. I am always happy to hear from readers. In the meantime keep up to date with all matters related to Employee Financial Wellness by signing up to our Newsletter.
The story so far..
Employee Financial Wellness (www.employeefinancialwellness.ie) began as part of the New Beginning story. New Beginning started life in 2010 as a group of barristers who wanted to help ordinary people deal with the banks in relation to their finances. Since then, we have expanded and grown our customer offering and we have now launched Employee Financial Wellness which aims to educate and help employees. We operate as Independent Financial Advisers which means we have no affiliation to a particular product provider and you are guaranteed non-partial advice. Our team are highly qualified and experienced experts and two team members are Certified Financial Planners, CFP®.
Our goal is to ensure that we educate and empower your employees to make the right financial decisions, now and into the future.
Employee Financial Wellness was established with an understanding that employee engagement at work is a key driver of increased productivity, stress reduction and increased wellness for employees. This leads to happier customers which in turn leads to an increased bottom line for the company.
Our mission is to improve Employee Financial Wellness by helping employees to fix the past and secure and build their future.
Happy Employees, Happy Customers, Happy Shareholders!