Financial well-being a must for mental well-being

By Bill Howatt
Photo: Adobe Stock

A good-paying job and money may not buy happiness, but they buy peace of mind — especially considering the current economic realities of inflation and high interest rates.

A growing number of employees are concerned about food insecurity, affordable living, and financial well-being.

I am coaching all employers now to ensure financial well-being is considered when facilitating psychological safety and workplace mental health. Employers can create programs to protect workers from mental harm and financial well-being concerns. They can do this at a relatively low cost by offering webinars that educate workers on the link between financial well-being and mental health and resources that provide guidance on dealing with personal debt challenges like credit card debt.

What is financial well-being?

Financial well-being is a worker’s capacity to manage their current financial obligations. At an emotional level, financial well-being is how confident and secure a worker feels about their financial situation now and in the future regarding their ability to make financial decisions beyond basic needs to activities like travel that bring joy to their life.

Financial literacy (knowledge) and spending behaviours predict financial well-being. Lack of ability to balance future financial well-being and current financial happiness is a challenge for many workers.

Financial happiness is subjective. Being unaware of how their spending micro-decisions (i.e., emotional or compulsive purchases put on a credit card) can negatively impact their future financial well-being and lead to stress can negatively impact a person’s productivity and mental state in the workplace. A recent literature review found a significant relationship between financial well-being and mental health.

Why should employers care about employees’ financial well-being?

Being distracted and worried about basic survival needs impacts workers’ performance and overall physical and psychological well-being. PWC suggests in a study that financially-stressed workers are five times more likely to be distracted, and around 46% spend three hours at work each week dealing with or worrying about financial issues.

The Financial Post recently reported that financially-worried workers spend around 30 minutes each day coping with their financial situation instead of focusing on assigned organizational tasks. The total annual lost opportunity for employers in Canada is approximately $40 billion. Workers concerned about financial well-being are twice as likely to report poor mental health and four times more likely to suffer sleep problems, headaches, or other illnesses.

Educate workers on financial well-being

Many employees lack the core tenets of financial well-being (i.e., personal budgeting and retirement planning). Without education and support, some get caught in a maladaptive coping habit that puts them further behind financially, resulting in counter-productive behaviours like lying and stealing to deal with their financial situation.

In a society of consumption and outsourcing, workers stressed about their life and work often look for emotional relief by buying things they cannot afford, eating out, or spending money on tobacco and alcohol to change their emotional state. One way to teach workers about financial well-being is to educate them about the direct relationship between financial decisions and mental well-being.

Below is Howatt HR’s Financial Well-being Rapid Confidence Quick Screen. The higher your score, the more likely you are experiencing good financial health. A score below 50 indicates financial stress that can negatively impact emotional well-being. Financial well-being after basic needs is taken care of is subjective. The income sweet spot for emotional well-being in Canada is estimated between $76,000 and $95,000.

Howatt HR’s Financial Well-being Rapid Confidence Quick Screen

Evaluate your confidence in each statement on a scale of one (low) to seven (high). 1-7

  1. I will be able to purchase the quality of food I prefer over the next 12 months.
  2. I can explain my financial retirement plan to a trusted friend.
  3. I can pay my rent for the next 12 months with no worries.
  4. I can handle a $3000 unexpected expense in the next 60 days.
  5. I can pay all my monthly expenses over the next 12 months with no concerns.
  6. I know what percentage of my monthly income is spent on bills and discretionary spending.
  7. I save each month for unexpected expenses.
  8. In five minutes, I could email my monthly budget for expenses, savings, and discretionary spending.
  9. I pay my credit card balance each month.
  10. I know plus or minus $100 what I typically budget for discretionary spending each month.

Add it all up for your total score.

If you are unsure how to improve your financial well-being score, meet with a financial planner who can help you make a plan that fits your situation. If you are struggling with anxiety, make an appointment with a mental health professional to get support.

What employers can do to support employees’ financial well-being

Do not assume financial literacy. Discuss financial health with employees because it can be a charge or drain on mental health. Financial knowledge gaps are why some employees do not opt into employers’ retirement programs and fully leverage benefits.

Before providing employees with the what and how the employer supports retirement and benefits, educate on the why to build financial literacy. Probably, many workers do not opt in because they have no context or understanding of the power of compound interest or how debt and savings work. This foundational knowledge is a must for facilitating behavioural change to move toward financial health.

It does not take a lot for employees to learn the power of saving by starting slowly, putting aside $50 to $100 a month as a stepping stone to discovering the power of saving. This can help train employees to make thoughtful financial decisions versus reactive emotional choices.

Educate workers about at-risk coping. Mental fitness is teaching workers knowledge and skills to spend more time flourishing than languishing. This is also a protective factor for mitigating the risk of mental illness.

Understanding how stress can drive at-risk coping decisions to escape unpleasant emotional pain is critical for good mental health. Without this knowledge, workers overwhelmed by life’s demands and stress will likely engage in immediate, feel-good behaviours that can put them at risk.

At-risk behaviours like spontaneous buying and spending may create the perception of short-term relief. However, the perceived benefits are often short-lived, and the reality of life soon kicks in. At-risk activities can result in a pattern of maladaptive coping behaviours that can lead to compulsive buying disorders.

The Addictive Disorders Screen (ADS-10) assists employees in screening for addictive behaviours that often begin as maladaptive coping strategies.