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Making Ends Meet

These guidelines from a financial education and counseling organization offer some guidance to HR professionals seeking to help their debt-ridden employees.

Friday, June 2, 2006
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Managing money can be a difficult task for many employees. Providing basic financial education can help them better handle their finances, and in turn, be more productive on the job.

As HR professionals know, financial stress can have a big impact on employees -- making them less productive on the job and easily distracted by personal phone calls dealing with bounced checks or car repossessions.

Here are some ideas on what financial-education services can provide and how education can help your employees manage their finances better.

* Begin with the basics of sound money management. For many employees, the place to start is with creating a realistic budget they can stick to. There are many financial-education tools that can help them understand what a budget is and how it works, as well as the benefits of taking control of their spending and saving.

The financial-education provider you choose to work with should offer hands-on tools like budgeting worksheets that prompt them to carefully track their spending over a few months to get a more accurate picture of what they really spend. From there, they can look for places to cut back on spending so they can live within their means.

If your employees are having serious debt issues, your financial-education provider should offer them tools like calculators to help them see how long it will take to pay off debt at their current pace, as well as providing solutions to help them pay it off sooner.

Give them access to financial counselors who can walk them through the pros and cons of bankruptcy, offer strategies for dealing with calls from collectors, and help them make a personal plan to become debt-free. Once employees get a handle on their current financial crises, they will be in a better position to move forward with more proactive saving for their future goals.

* Help them understand that taking advantage of employee benefits can actually save them money. Many people do not realize the impact of 401(k) contributions (as well as flexible spending and/or dependant-care account deposits) on lowering taxable income.

Be sure they understand how their contributions "cost less" than they think. This is something you could include in the retirement-plan enrollment meetings conducted by your plan provider, or in separate financial workshops designed to educate them on the importance of saving for retirement and using the other employee benefits they have access to.

For many employees, being able to afford participating in company benefits is their biggest obstacle to long-term financial success.

It is well-known that there is a strong connection between poor money management and not contributing to retirement plans. A 2004 Hewitt Associates study found that 51 percent of employees cite "other financial obligations" as the No. 1 reason preventing them from contributing more to their 401(k) plans.

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Specifically, day-to-day needs, saving for emergencies, saving for children's needs and lifestyle purchases are the main areas competing with saving for retirement. If you are able to help employees plan for day-to-day needs through teaching good money-management habits, they will be much more likely to use the benefits you provide.

* Encourage them to keep what they have already saved for retirement. It is very tempting for people experiencing financial trouble to look at their retirement accounts as an accessible source of funds. Give them resources to help prevent retirement-plan withdrawals.

Just talking with an unbiased financial professional can often times help them to find sources of funds other than their retirement accounts. Be sure that the provider you choose has a staff of professionals ready to answer financial questions from your employees.

Financial education can be delivered in many different ways, including workshops that are interactive and focused on solving their personal issues, and through one-on-one counseling with unbiased financial planners who do not sell investments or other products. By beginning with the basics, you will give them the tools to conquer their current problems and set them up to build a secure financial future.

Financial Finesse, based in Manhattan Beach, Calif., provides unbiased financial education, coaching and counseling programs to more than 350 corporations and credit unions nationwide. 

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