Employee FAQ’s Regarding Their Health And Wealth During COVID-19

March 24, 2020

In addition to the COVID-19 Financial Survival Kit Webcast, the FF team has received hundreds of proactive and reactive calls and emails from employees asking what they could and should be doing financially during this volatile time. We wanted to share some of the most frequently asked questions we’re hearing and the responses from our expert team of CFP® professional financial coaches.

1. I am not so worried about my 401k because I have some time until retirement, but I still have pre-school expenses. My child’s preschool has not yet said when they will open and if I need to continue to pay while they are closed. What should I do to manage the uncertain expenses?

Start with the facts and proactively plan for any variable you can control. Ask your daycare what their policies are and if they have any new updates. Many preschools / day cares are offering to reimburse or halt payments if your child isn’t coming in. Some will do that if it’s for a two-week period or more. Dependent care FSA’s are a resource, but most of the time only if people signed up at annual enrollment.

What are your options if your child needs to stay home longer than you are working from home? If you haven’t already, write down your budget and compare it to a new one with you at home. If necessary, decide which expenses you will cut. Explore ways to cover the need –high school kids are home; do you have one you trust who could watch your child? Are your parents able to help? Are you able to work from home long-term? If so, have a plan for your child so you can focus on work.

2. I am actually thinking about investing in this market, to take advantage of the lows. What do I need to consider before I do so?

Market corrections are historically the best time to invest, but every correction is different. Today (3/16/2020) the market has declined over 30% from its high point less than a month ago. The main concern this time is how COVID-19 will impact the economy over the long-term. For money that is intended for ten years and longer, this could be a great time to invest –stocks are cheap overall. It could also be a good time for tactical investors to purchase stocks with the intent of selling them for a short-term profit. This, of course, takes a higher risk tolerance for loss and more knowledge about investing.

Many brokerage firms offer inexpensive options to purchase a small number of shares so build positions over a few different time periods. If you want to buy 100 shares or put $1,000 in a certain stock, ETF or mutual fund –buy a third or half now and the rest later. This way, you’re not betting on one particular date and are dollar-cost averaging.

Regardless, first make sure your emergency savings are where they need to be –especially in light of this pandemic and how it might impact your income –if all that is set and you have no other short to medium term goals – then yes this can really help you boost your retirement savings. You can do this easily by simply increasing your 401k contributions into a strategy that aligns with this goal.

3. I am worried that I will not be able to stay productive while I am at home, trying to work and home school my three small children. How do I make sure that I am not penalized for this at work?

You’re not alone! First, contact your employer, and discuss how this needs to work. A lot of employers are making concessions and creating more flexibility. Plus, the federal government is putting more muscle behind this so that employers follow.

4. My partner wants to put more money into the market right now, but I am worried that we will just lose it all. What should we do and how do I get over this disagreement with my partner?

First, see response to question 2. Second, you should establish an amount that you are both comfortable with to invest and potentially experience short or long-term losses. Discuss how the loss could affect your overall plan. For the amount you are going to invest, consider investing over a few different dates to avoid trying to pick “best date.”

5. I have a healthy emergency savings account …. I think. How do I know what is a healthy emergency savings account now?

This depends on your specific circumstances. The short answer is: “if you tell me your emergency, I can tell you how much you need in your emergency fund,” but we don’t know exactly how that looks. Consider 3-6 months of expenses as a rule of thumb or how many months it would take you to replace the income you might lose. For some that might be 2-3 months for others it could be longer.

The average time it takes to replace every $10k in income can be about 1 month, but it really does depend on your job, industry and the current job market.The biggest risk for most of us is the loss of a job and this pandemic might have made that risk higher for some. It’s not a bad idea to beef up your emergency fund at this time, delaying major purchases for a few months if you have more risk, watching your spending a little closer and saving in general. If this blows over shorter than the experts expect, you will be in a great place.

6. I was planning to put some money into my kid’s 529 accounts, should I wait? Should I keep it in a more liquid account?

If you have an adequate emergency fund and low debt, you might want to continue purchasing funds in your 529 plan and take advantage of the monthly dollar cost averaging –purchasing shares of funds on the same date every month spreads your risk, buying more shares when prices drop.

7. My kid is going to college next year. How can I take advantage of the low interest rates that I have been hearing about?

Borrowing for your child’s education is a larger topic to really plan for. Student loans are not available a year before they attend school. There are opportunities right now for borrowing at low interest rates such as home re-financing, home equity loans and personal loans. IF, if, if this is your well thought out plan, you may want to talk to a couple lenders and explore rates. This is a good time to review your child’s investments and adjust if necessary. If available, this is a great conversation to have with a financial coach.

8. I wanted to invest some money into my house. Should I wait or use the time to stimulate the economy and online shop?

This depends on your overall financial health and balance sheet. The economy could use your help, but you shouldn’t put yourself in a potentially compromising position. I would first review your financial priorities. Do you have adequate emergency savings, are you contributing to your 401k to get at least the match, do you have any high interest rate debts?

Also, it depends how you want to invest in your home. Do you want to renovate, make repairs? Are you looking to make additional payments? Now might be the time to refinance your debts to lowers rate and explore making the same or more payments to pay them off faster vs investing for your long-term goals. There is a trade-off for every decision you make depending on the time you have to get to that goal, and your tolerance for risk.

9. I don’t know if my preschool can continue to pay teachers while the school is closed. Is there something that I can do to support them? Is the government doing anything to help these low paid hourly workers?

I recommend contacting your care provider and asking them directly. If you have the means, you can buy gift cards or offer to make a utility bill payment for them. One of our coaches has volunteered to continue school payments even though they’ve kept my kids at home. Congress is debating a relief package, but we don’t know what it entails or when it will be approved.

At this time we are not aware of any government sponsored or state sponsored programs to help this exact demographic – however in general, states are making unemployment insurance more readily available, some employers are offering paid time off, and paid family leave (depending on the size of the organization that may or may not be mandated at the federal level).

10. My partner may lose his job or some of his income. We were actually planning for our income to increase this year! How should I rethink all of this during this uncertain time?

Re-assess your situation and map out a scenario for both potential paths. If you have a decline in income, decide how you will either make up for that income in another way or decrease expenses. Challenge all your fixed home expenses – do you need them? Are you paying the right amount? Control your variable expenses – limit the amount you are spending on groceries, dining out, entertainment, etc.

Create a crisis budget then start living off of that right away to increase cashflow to savings. Try and build that up as much as you can. Line up other methods of income, savings that might be available to you as needed, review company benefits and speak with employer about help that might be available if you were to lose your income. Some are offering paid time off, paid sick leave, and/or paid family sick leave.

11. If you are in the position to help others, what are some immediate actions you can take?

  • Supporting small businesses
  • Supporting those who may be impacted more directly (teachers, childcare providers, people who work in your home)
  • Consider reaching out to elder care centers, nursing home or your neighbors that you know might be at risk. Offer to run errands for them –whether it’s shopping for groceries etc.

12. I have some loans that I was thinking about paying off (or I was debt snowballing my way to financial freedom). Is this a good idea or should I hold onto my cash?

It depends on your emergency savings situation, and the likelihood of your household losing income. If your savings aren’t where they should be and or you feel your income is in jeopardy – then the answer is to pause any aggressive debt paydown plans and save more cash for now. If your interest rates are high, you might keep a month’s expenses in cash and use the rest to pay off your debt.

13. What can I invest in that will help stimulate the local economy? The national economy?

Given the nature of the virus and our focus on containment and social distancing – make sure to follow CDC guidelines and do your best to support businesses in a way that serves your needs and helps stimulate the local economy but doesn’t put you or others at risk. (ie grocery stores, pharmacies, ordering your goods online to be delivered curbside, ordering delivery from local restaurants / deli’s if that fits your budget and needs). Don’t jeopardize your own financial safety in the process!

14. I’m planning to retire in three months and I’m invested in the market. What should I do? Will I still be able to retire?

This is a difficult decision because you might have experienced significant losses already. You should run a retirement estimate and re-assess your retirement plan to determine how the recent market declines have impacted you and your ability to meet your future retirement needs. If you are planning to retire in the next year or two, compare your current cash flow (income and expenses) with your potential phases of retirement (when your income or expenses change can define the different phases). With that analysis, you are able to identify shortfalls in the short, mid and long-term.

You might consider investing money you’ll need in the short-term (next 5 years) in a safe place like cash, stable value, money markets, CDs, etc. You can’t confidently expect losses to recover in time before you will need the money. The mid-term money could be invested conservatively with the goal of pacing inflation and fulfilling the shortfall need in 5-10 years. Short and mid-term bond funds, conservatively managed portfolios and laddered CDs are examples.

Money needed in more than 10 years can be invested according to your risk tolerance and need for potential growth. If you can determine that you don’t need to take a lot of risk to meet your needs, you might want to reduce it. If available, absolutely call a financial coach! 

15. Should I stop contributing to my 401k?

Typically, the answer is no for a couple of reasons. If you are getting an employer match, at least try to contribute enough to get that free money. For most plans, you are not able to get that matching opportunity unless you beef it up significantly at the end of the year. Also, you might have experienced losses in your account. One way to recover from these losses is to continue to dollar cost average (automatic investments over time) into funds that are down so when the market recovers, you see gains. Buy low for the long-term.

However, if you are in a situation where you have no or very little emergency savings and feel that your income is threatened then this might be one of the only times to consider doing that so that you can shore up your emergency savings. If you are in this situation you will FIRST want to challenge all of your expenses and keep only the essentials. All extra cash should be diverted into your emergency / crisis / protection fund.

16. What does it mean to take a 401k loan in a down market? What are the pros / cons versus using a credit card?

Taking a loan from your 401 (k) is discouraged unless necessary. But if you need to take a 401 (k) loan, it is best to avoid doing so in a down market. Of course, you don’t have the luxury of knowing when you will need it or even if you are in a market that is increasing or declining. If you take a loan when the market is low and pay it back monthly in a rising market, you are essentially selling at a low price and buying back as prices increase, not a good investment strategy. This could work in the opposite way if you take a loan and the market declines as you pay it back, this would be a good investment strategy if you could predict it.

How To Make Financial And Life Decisions in Uncertain Times

March 19, 2020

If you are a planner like me (full disclosure, I am not a CERTIFIED FINANCIAL PLANNER ™, but a planner in the generic sense), who likes to analyze all of her available options before making a thoughtful and well-informed decision, you may feel frozen from action in the current environment. New developments on public health recommendations, personal health recommendations, and the general state of the economy are being broadcast daily. How can we make the “right” decision when the situation may be entirely different tomorrow?

We all must make daily decisions, and in uncertain times, the importance of those may feel amplified as we try to control the situation as much as possible. To clarify, when I refer to “decisions,” I am referring to both the smaller things in life –Should I still plan a summer vacation? –and the bigger life event-related ones –Should I have another baby? Should I switch careers? These questions can be applied to all decisions, including financial ones.

One option is to freeze all decision-making until things have stabilized. For a lot of decisions, this strategy could work. However, what if you have a time-sensitive decision or an opportunity that may not last long? Below are a few questions to ask yourself as you navigate a decision in an uncertain time:

Do I really need to decide now?

When you are close to a situation, it can feel like you must decide right now. However, for most things in life, that’s not the case. Consider whether waiting to gain some perspective will help you make a better decision, and one that you feel more at peace with. Try to avoid letting fear and panic guide your decision making. Write a date on the calendar to revisit the decision, to hold yourself accountable to deciding and not putting it off indefinitely.

What is the best-case, worst-case, and most likely scenarios for each option? What are the potential upsides and downsides of each scenario?

This is something that I do a lot at work, when making my own decisions or helping a colleague make a decision. But I find that most of us are less likely to do it in our personal lives, and especially around our finances. It can be easy to get emotionally invested in a specific outcome rather than looking at all outcomes. If you’re not sure of the upsides and downsides of a financial decision, call a financial coach to help you identify them!

What is my back-up plan if things go poorly? What does my support system look like?

Contingency planning is critical here, and your support system plays a huge role in what your worst-case scenario looks like. Are you thinking of switching careers, moving across the country, or buying a house right as we head into a recession? Your age, your savings, your income streams, your partner, and your risk tolerance will all impact how the worst-case scenario looks for you.

Every day we make a multitude of choices, and ultimately our lives become the sum of these choices. Do what you can to set yourself and those around you for success, but know that there’s no such thing as a “perfect” decision

Are You Financially Immune From The Next Emergency?

March 17, 2020

The following post is an excerpt from the Financial Finesse Personal Finance FORBES Blog. You can read the original post in its entirety here.

In many ways, emergency planning is the Rodney Dangerfield of financial planning. It gets no respect. The typical advice is to simply stash away enough cash savings to cover 3-6 months of income and then move on to more exciting topics like investing and retirement planning.

However, an event like the coronavirus has shown that merely having emergency savings is not enough. Just like an investment portfolio, a properly diversified “emergency portfolio” requires more than just savings in the bank. Here are the elements you’re going to want to make sure you have before the next big disaster:

1) An emergency kit

No, you don’t need to become a full-on “doomsday prepper.” You just need some basic tools, first aid supplies, and enough food and water to last at least 3 days. You can get checklists from the Department of Homeland Security and the Center for Disease Control. You can then supplement it with supplies for those types of disasters that are most common for your area.

2) Food reserves

If the emergency lasts more than 3 days, you’ll still want to be able to eat. Rather than purchasing specialized “emergency rations,” you can simply bulk up on long-lasting food that you already eat. At the very least, it’s something you know you’ll need and can benefit from even if no emergency ever happens. In fact, you’re likely to save money this way. Simply replace the items as you use them and perhaps add items when they’re on sale.

A food reserve can also be part of your regular emergency fund, thus reducing the amount of savings you need. After all, you can eat it when you’re unemployed too. Sure, you would miss out on the less than 1/10th of a percent (minus taxes) you’d otherwise be earning with that money in the average savings account. But according to the most recent CPI release, the inflation rate of food at home over the last 12 months ending in January was about 0.7%, so you’d actually be saving a little more than what you likely would have earned keeping that money in the bank.

3) Physical cash

No matter how adequate your emergency supplies are, you never know what you may need to purchase from someone else in an emergency. That’s why they say “cash is king.” Although the financial world refers to bank deposits and money market funds as “cash,” in a true crisis, banks may be closed, ATMs may not be working, and money market funds may not be available if the stock market is suspended (as it was after 9/11). Some preppers like to keep gold coins for this reason, but people may not know how to judge their value in a crisis. Instead, consider keeping at least a few hundred dollars in physical cash (even if it’s under the proverbial mattress).

4) Emergency savings

None of this means you won’t still need some savings in the bank. You can’t exactly use food to replace items damaged in a storm or fire. Nor is credit a good substitute for savings since lines of credit can always be cancelled, which is all the more likely during tough economic times or when you’re unemployed—the two times you’re most likely to need it. For this reason, you may want to use any low-interest (below 4-6%) credit available to you before your cash reserves so you can preserve them as long as possible.

How much do you need in savings? Even so-called “financial gurus” don’t agree. Dave Ramsey suggests a starter emergency fund of about $1k until you’ve paid off all your high-interest debt. Suze Orman recommends having 8 to 12 months’ worth of expenses in savings before paying off debt. What you decide to do may depend on your personal comfort level, the availability of other sources of financial support, and how risky your income is. You can use this calculator to get an idea based on your expenses and how difficult it would be to replace your income.

These savings should be somewhere safe and accessible like an insured bank or credit union account. If you want to maximize your interest, consider a rewards checking account. They can pay over 5% in interest, and many will reimburse your ATM fees as long as you’re willing to bank remotely, use direct deposit and electronic statements, and use your debit card 10-15 times a month.

5) Adequate insurance

No matter how much savings you have, it probably won’t be enough to cover some of life’s biggest financial disasters. That’s why you need adequate health, auto, renter’s or homeowner’s, disability, and life insurance. If you’ve accumulated a lot of assets, you may also want to consider enough umbrella liability and long-term care insurance to “CYA”: cover your assets.

Whether it’s the current threat of a possible pandemic or potential terrorist attacks, natural disasters, or financial crises, many experts fear that our world is only getting more dangerous. No one knows when the next disaster will be. The only question is whether you’ll be ready.

SOA & Financial Finesse Retirement Literacy Briefs

December 05, 2019

The Society of Actuaries Aging and Retirement Strategic Research Program and Financial Finesse are pleased to make available a series of briefs focused on retirement literacy issues.  The first brief in the series explores retirement from a holistic perspective looking at non-financial issues. The second brief looks at retirement planning and the things to consider throughout one’s career.  The third brief explores the types of expenses that may occur in the first year of retirement. The fourth brief provides a resource for better understanding retirement tools. The briefs were developed by a team led by Greg Ward of Financial Finesse.

How Long-Term Engagement in Financial Wellness Influences Retirement Preparedness

June 07, 2019
For this year’s report, we analyzed the change in financial health over the last five years for employees
who completed a financial wellness assessment in 2013, and again in 2018. Each employee had access
to an employer-paid, multi-channel, holistic financial wellness benefit that included online tools and
resources, educational workshops and webcasts, and personal financial coaching.

Society of Actuaries – Calculating ROI: Measuring the Benefits of Workplace Financial Wellness

May 23, 2019

As human resources executives and benefit-plan sponsors prepare their 2017 budgets, many will question the value of investing in a workplace financial wellness program. Determining the true value of such a program has proved to be elusive, but recent research from the Financial Finesse Financial Wellness Think Tank has introduced a viable way to forecast the potential return on investment (ROI) of the programs using data collected from actual clients. This model, as shared in a 2016 report,1 provides results that indicate employers can find it beneficial to invest in a highquality financial wellness program.

2018 Financial Wellness Year in Review

May 01, 2019

Abstract

In this report we propose best practices for workplace financial wellness programs to offer retirement guidance across an employee’s full career and analyze the positive impact of financial coaching on improving retirement outcomes. We offer a model for measuring the ROI of reducing the costs of delayed retirement for these employees.

Financial wellness improved in 2018 aided by long-term users of holistic, multi-channel financial wellness benefits. Improvement occurred in most areas, including cash and debt management, college and retirement planning, and investing. An in-depth look at workers who engaged in financial wellness benefits since 2013 found significant improvement in retirement preparedness and investing confidence.

The financial stress of American workers moved slightly lower, but levels remain alarmingly high for single, African-American moms. The gender gap in financial wellness slightly widened, particularly in the areas of cash and debt management. Student loans continue to hamper the financial wellness of younger workers, while pre-retirees remain surprisingly unprepared for retirement. Lastly, minority workers improved more than other groups in overall financial wellness.

To read the full Report, download now.

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Your Company Just Launched A Financial Wellness Program. Is It The Real Thing Or Just A Sales Pitch?

March 17, 2019

How can employees determine if what’s being marketed as a ‘financial wellness program” is a real benefit which offers unbiased guidance and coaching, or a sales pitch of financial products or services?

Considering A Financial Wellness Program For Your Employees? Make Sure You Ask These Questions First.

March 03, 2019

These are the first three questions every employer considering financial wellness should ask prospective vendors in order to fully protect their employees and set their programs up for success.

Special Report: ROI of Improving Employee Retirement Preparedness

October 30, 2018

Abstract

In this report we propose best practices for workplace financial wellness programs to offer retirement guidance across an employee’s full career and analyze the positive impact of financial coaching on improving retirement outcomes. We offer a model for measuring the ROI of reducing the costs of delayed retirement for these employees.

To read full Special Report, download now.

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Financial Life Planning at Work: How Financial Mentorship of Younger Employees Leads to Improved Retirement Preparedness

August 22, 2018

Employers that offer financial coaching and mentorship to their early career employees are more likely to help them achieve their life goals and enjoy financially healthier lives.

2018 Life Events Research

February 01, 2018

Abstract

Each employee has different aspirations for what they want out of life. In this study, we examine three of the most common life events that employees proactively face: buying a home, getting married, and having children. Each of these life events, in one way or another, has a relationship to an employee’s financial wellness. By understanding this relationship and providing employees access to the ongoing financial coaching, tools and benefits needed to effectively prepare for life, employers can enhance employee job satisfaction, promote productivity, and achieve a greater return on investment on their Financial Wellness benefit.

To read full Report, download now.

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2017 Generational Research Report

July 01, 2017

Abstract

In this report we propose best practices for workplace financial wellness programs to offer retirement guidance across an employee’s full career and analyze the positive impact of financial coaching on improving retirement outcomes. We offer a model for measuring the ROI of reducing the costs of delayed retirement for these employees.

To read full Report, download now.

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Delivering Workplace Financial Wellness With A Salaried CFP Career Path with Liz Davidson

June 06, 2017

Workplace financial wellness programs are rapidly becoming a “must have” employee benefit. In this podcast with financial planning thought leader Michael Kitces, our CEO Liz Davidson discuss trends in the industry, and Financial Finesse’s unique model for delivering unbiased workplace financial wellness benefits with CERTIFIED FINANCIAL PLANNERS™ which improve employees’ financial security and provide ROI to employers.

Special Report: Optimizing Financial Wellness Programs for a Diverse Workforce

May 01, 2017

Abstract

This report examines how financial behaviors over time can create a cycle of low financial wellness. This cycle can affect the ability of different ethnic groups to build and transfer wealth, which impacts the next generation. Employers are in a unique position to help stop this cycle and usher in a new generation of wealth builders.

To read full Special Report, download now.

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How to Keep Your Employees’ Finances from Flat Lining & Retain Top Talent

April 13, 2017

Healthcare employees rank the absolute lowest in financial wellness, with below average grades in the areas of financial stress, retirement planning, investing, debt, and money management. Read Financial Finesse’s case study of a Fortune 500 Healthcare Company’s successful financial wellness program to learn how to tackle the unique HR and benefits challenges facing healthcare professionals.

Workplace Financial Wellness Programs: Frequently Asked Questions

February 08, 2017

Liz Davidson, founder and CEO of Financial Finesse, answers some of the most common questions about workplace financial wellness programs, such as how to have an impact on every employee generation present in the workforce; where fintech tools fit into your program; how to decipher between financial wellness programs and financial education programs; and more.

Workplace Financial Wellness Programs: Best Practices Guide

February 08, 2017

Our best practices guide for workplace financial wellness programs defines what it means to be financially well, and what constitutes a workplace financial wellness program to help employers avoid ‘bait and switch’ providers who are marketing themselves as financial wellness providers when in reality, they are aiming to sell employees a financial product or service. This guide aims to set industry standards around financial wellness programs in the workplace.

Gender Gap in Financial Wellness

January 01, 2017

Abstract

The Financial Finesse Gender Gap in Financial Wellness report is an annual review of the financial wellness gap that exists between women and men in the workforce. It examines a variety of financial behaviors and outcomes, as well as the societal, psychological and practical barriers to gender parity when it comes to cash flow issues, retirement preparedness and other aspects of financial wellness. The report offers suggestions for employers and individuals to help close the gap and promote total financial wellness for all employees.

To read full Report, download now.

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2016 Financial Stress Research

January 01, 2017

Abstract

American employees continue to experience high levels of financial stress, and could be losing sleep over it. In this research report, we look at which employees are the most stressed about money, and what employers can do to help their employees develop the solid money management and investment planning skills they need to find lasting financial peace of mind.

To read full Special Report, download now.

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