Stressed about money? You’re not alone.
Financial stress is a significant problem for many adults in the United States; in fact, 44% of Americans reported that money is their number one stressor, according to a Northwestern Mutual 2018 Planning and Progress Study.
Stress in the workplace can cause significant problems for both employers and employees, and many of these problems stem directly from poor individual personal finance skills. Addressing the key issue of finance is important, but first, one must understand how stress affects the work environment.
Table of Contents
• How Can Stress Impact the Workplace?
• How Do Poor Finances Cause Stress?
• How to Improve Your Finances
How Can Stress Impact the Workplace?
Stress can impact employees and a company in a number of different ways.
Stress can impact personal well-being and health, and these problems can lead to more issues such as lower job performance and productivity. It may surprise you, but a Health Advocate study found that stress causes up to $300 billion a year in lost productivity, one million U.S. employees miss work daily, and between 60% of 80% of workplace accidents.
Three out of every five workers admitted to losing productivity at work due to stress in the Health Advocate study. Furthermore, a study by Integra showed that stress is affecting team cohesion with 29 percent of workers admitting to yelling at their co-workers due to stress.
These problems can add up and hurt a company by pushing back deadlines, reducing work quality, and increasing burnout. If this becomes the norm, many business-related problems may arise from the fallout.
So, what does this have to do with financial literacy?
How Do Poor Finances Cause Stress?
High debt and other financial obligations are enormous stressors, especially when living paycheck-to-paycheck. A recent study by Ayco found that 43% of employees don’t live within their means, and 25% see paying for essentials as stressful. When employees aren’t managing their money well, financial setbacks or emergencies can lead to elevated stress.
For example, unexpected medical bills could throw an employee into the frying pan. Two thirds of Americans claimed the cost of health care was a major stressor according to the American Psychological Association. But it doesn’t end with medical bills and health insurance; high debt is another concern.
Those with high debt are often forced to funnel most of their energy towards repaying debt, but they aren’t always successful. Student loan debt is one example that highlights a lack of financial literacy.
CNBC reported that student loan debt caused “significant” stressed for 80% of young professionals, impacting their basic ability to pay rent or for other necessities. According to another CNBC report, more than one million student loan borrowers go into default annually. This alludes to two issues: a lack of knowledge before taking on debt and a lack of repayment know-how afterwards.
These problems extend to other debts and liabilities as well. Urban Institute published a report claiming 35% of Americans with a credit account have missed payments for medical bills, credit cards, utilities, etc. High debt can an adverse effect on credit, finances, and mental health, and missing payments simply compounds these issues.
How to Improve Your Finances
Resolving money stress often starts with addressing the root causes which is often high debt and poor budgeting. Much of this starts with paying off debt and saving money more effectively – two major aspects of financial health. They sound simple, but are challenging in their own way.
Paying Down Debt
Whether it is credit card debt, mortgage debt, student loan debt, or auto loan debt, there are ways to pay down debt more efficiently, at a lower cost, or simply sooner rather than later. It starts with knowing all the options.
Workers can often receive help from their employers who offer tuition coverage to employees. Those who work at Disney World can attend college in Florida for free with full tuition coverage. Other examples include Starbucks, who helps employees attending Arizona State University, and Walmart, who recently expanded its education benefits. Further, Chipotle has helped over 7,000 employees pay for college since 2015. Clearly, companies see the value in helping their employees get educated; these can be especially useful in employee retention as well.
There are other ways to deal with student debt. For instance, student loan debt is a serious concern for many workers; however, borrowers can fall back on income-driven repayment programs that limit payments by income. The federal consolidation program can reduce payments over a longer repayment term; alternatively, borrowers can seek a lower interest rate through student loan refinancing with a private bank. The debt avalanche or debt snowball repayment methods are two examples of budgeting tricks for multiple debts.
Many of these strategies apply to other forms of debt. Multiple credit cards can be paid off using personal loans or debt consolidation loans. Auto loans can be refinanced. The debt avalanche/snowball methods can be applied to multiple debts including credit cards, auto loans, and more. Understanding these methods can help stressed workers manage their debt and move forward financially.
Saving money is both necessary and beneficial. It offers individuals more leeway and breathing room, and it is also a sign they are not living paycheck-to-paycheck. With more savings in the bank, consumers have better options during emergencies, the capability to make larger payments on debt, and greater peace of mind as a result. Once again, employers have a knack for helping with this.
The concept of Same-Day Pay offers employees 50% of their daily pay after a shift which helps those living paycheck-to-paycheck meet spending needs without relying on credit. Shake Shack experimented with shorter work weeks at the same pay, increasing the value of work hours. Additionally, companies have expanded benefits to help workers during expensive transitions, such as Sweetgreen who expanded its paid parental leave benefits. All of these can help employees manage their money and budgets.
It’s still important to learn how to save money individually. This starts with learning how to budget which involves tracking income, spending habits, and expenses. The point is to reduce your spending and expenses, leaving the door open to save more money. This often requires cutting out expenses like cable bills, extra snacks at the grocery, magazine subscriptions, and anything else extraneous.
One trick is to rely on an envelope budget system which involves taking out cash in an envelope for expected expenses. You must only pay for everything in cash without dipping into savings. With a spending threshold in play, you can try to boost your savings over time. There are plenty of other ways to save money and budget.
Money is a major contributor to stress, and oftentimes, this stress boils over and affects the workplace. Learning how to manage finances through successful debt management and better saving habits can help counter money stress. Lower stress levels may help workers perform accordingly at work and improve productivity.
Andrew Rombach is a Content Associate for Lendedu – a website that helps consumers and recent graduates with their finances. When he’s not working, you can find Andrew hiking or hanging with his cat Colby.