Updated: Feb 17
A penny saved is a penny earned.
In these challenging times, taking care of your financial well-being comes very close to your physical and mental health. Even as the world worries about the loss of precious life due to pandemic, the investing community worries about losses in their portfolios. Worry doesn’t help, however. What might help investors tide over the current crisis is some rationality and some caution. Money plays a very important role in our lives and it has to be managed in a very wise manner. Let us see how we can observe investment hygiene to prevent and minimize harm.
According to research from the Global Financial Literacy Excellence Center at the George Washington University, there is an acute need for employers to invest in employee or individual financial health. This is even more true given the current economic crisis and pandemic. Employees/individuals reporting to work while feeling anxiety and stress due to their financial insecurity has implications for not only the employee’s well-being, but it also affects the workplace. A number of studies confirm that employees lose hours of productivity each week thinking about or dealing with their personal finances. That is why employers and organisations have started taking the important step of offering workplace financial wellness programs.
Are you confused about your finances then here are the a few simple Signs of Financial Wellness that will help you understand better: Some of the major signs of financial wellness can be listed below such as:
1. Having sufficient money to meet the household necessities.
2. Being able to afford medical and health care facilities.
3. Sufficient savings for post-retirement life.
4. Complete control over one’s own financial situation.
5. The level of financial stress is low.
This would help your millennial employees or organisations or individuals in making judicious plans for the achievement of their long-term financial goals and would even lower their levels of financial stress.
As a Masters student Specialized in Financial Economics here are my inputs on wise methods of investments and savings after a detailed analysis and research that will help you to maintain a positive Financial Wellness in your personal and professional life:
1. Digital Currency :
Digital currency and blockchain technology is definitely the future of 2021 as a new normal and a tool that would spark an entire new economic institution. Cryptocurrencies like Bitcoin (BTC), Ethereum(ETH), Ripple(XRP), Litecoin, Tether(USDT), Libra(LIBRA), Monero(XMR), Binance, Coin(BNB), Bitcoin SV(BSV), Bitcoin Cash (BCH) etc. have proven resilient during the pandemic. Investor interest in them has risen drastically but still experts say that the cryptocurrency is very volatile in nature and it may incur loss if we are not aware of the positive/negative consequences or right investment technique. Now I know there are a lot of reports and many countries have still not legalized cryptocurrencies but looking into another side of the coin it does have a wide market in terms of financial investments. The broad consensus as we understand is it's just a matter of time.It is the future everyone will have to take the plunge on. China is already testing the digital Yuan, the United States, Britain, France, South Korea and other several countries are taking similar steps. Why is this digital transformation?let me explain it with a simple reason :
In other terms digital currency allows you to make payments quickly & inexpensively,cuts down on printing costs,you don't need a special paper with water marks. In India we already are making full use of contact less payments like Patyam and Gpay.In Russia there is pay pass and apple pay,In China the people are accustomed to pay by QR Codes even by face scanes,In USA people love to go to Amazon Go stores where they can pick up whatever they like and simply walk out further their purchases are tracked and debited automatically. Digital currencies are a logical continuation to this evolution. They may become a reality across the world in coming days of 2021.So keep a close eye on the digital currencies and you may also try to invest and experiment your finances and investment techniques for your future needs.
2. Catered Health Options:
Financial worries take a toll on most individual’s health. Yet, navigating the health system and its various insurance plans generates even greater difficulties. An effective 2021 financial wellness plan will need to promote a variety of options beyond the typical forms of coverage such as HSA(Health Savings Account) or Health insurance with employer/individual/organisation matching; built-in vision, dental, and mental health coverage; or expanded family benefits. 3. Short-Term Savings Plans:
More than likely, the economic crisis an individual or an employee needs to face is a short-term rather than long-term one. Understanding this, you may find that setting up short-term savings plans would allow employees to navigate around the crisis with the added support of readily available funds or even a small quantity of gold or jewellery to pledge in the time crisis also will work(This is predominantly more seen in Indian families)
4. Long-Term,Personalized Financial Education:
Overcoming the short-term financial crisis does not mean we forget about long-term financial stability. People who intend to process a financial wellness plan on a consistent basis contribute more to their retirement plans than those whose financial education occurs once a year, if at all. Current technological advances allow for such education to be tailored and easily accessible
5. Boosting Emotional Immunity:
Ben Graham once said that “ the chief enemy of the investor is himself/herself ”. In falling markets, emotions run high. A knee-jerk (mis)step arising out of fear or greed may irreparably damage your portfolio. Often, such overreaction is caused by lack of an alternate perspective and inadequate knowledge. Counter it by boosting your emotional immunity. Get wiser about investments and finances. A number of great minds in investing are speaking in free webinars nowadays and even we have advisors available who can help you with investment techniques. Listen to them. Ask questions. Compare and contrast advice. Try to stay rational. One of the best tools to prevent infection from Covid-19 is personal hygiene. Likewise, investment hygiene can go a long way in protecting you from avoidable financial damage.
This pandemic is as much a social and economic crisis as it is a humanitarian one. Considering the uncertain path that lies ahead, helping the country’s poor to become self-sufficient and better prepared could prove to be the best weapon against the deadly virus.Financial literacy is one of the tools that can help people get jobs. Companies are more likely to employ someone with a bank account and with basic numeracy skills.
Picture source: https://moneybadass.co/blog/financial-freedom-pyramid
Financial Literacy in India:
India has for a long time tried to tackle the problem of its unbanked masses. It has introduced several nationwide initiatives to get people into the digital payment world and promoted platforms such as the United Payments Interface as part of a drive to accelerate financial inclusion.Before Covid, the Reserve Bank of India has set up financial training pilots programmes, the training of trainers, and harnessed social media to drum up more interest.In traditional parts of India, women are seen as homemakers and do not make monetary decisions beyond household expenses.But the Government of India has understood the importance of teaching women financial skills, especially during an economic crisis like the one in the pandemic time and now majority of people are having a good knowledge of finances and money saving techniques.
Self Assessment of Financial Wellness :
As a part of exposure to financial wellness for you here are some suggestions to assess your financial health. You can perform a self-assessment of your financial health by asking some of the below-mentioned questions:
a) Do you have an emergency fund to meet the unprecedented circumstances and events?
b) Are you saving properly for your retirement? Will those savings be adequate to achieve your long-term goals?
c) Do you have adequate insurance cover i.e. either health insurance or life insurance?
d) Is your net worth positive or negative in total?
e) Do you have all the necessities and how about the luxurious things which you want?Today, the financial wellness in a nutshell for major employees/individuals should cover the different aspects related to financial health such as:
i) Setting up of financial goals on regular intervals
ii) Budgeting for household and personal expenses
iii) Emergency fund and short-term savings
iv) Credit building by individuals/organisations etc
v) Debt reduction
vi) Learning Management techniques for the financial crisis
vii) Changing the Spending pattern and behavior
viii) Smart shopping tactics
ix) Student loan repayment assistance
Picture source:Centre for Social Impact, http://www.csi.edu.au/media/Financial_Wellbeing_-_Tree.jpg
Financial Wellness Becomes Most-wanted Benefit:
A holistic financial wellness is the basic need & necessity now which gives your household,companies,organisations and individuals the resources to pursue opportunities in all aspects of their lives to achieve overall well-being. Heading into 2021, financial wellness tops the list of most desired programs because every individual wants to be seen, and heard, and feel like their needs are essential to the organizations and households they devote so much time and energy to.
Picture source: Jason Vitug,Founder of Phroogal
Being financially aware is no longer a luxury, but essential for people to live a happy and productive life. Every Individual should have “the ability to use knowledge and skills to manage one's financial resources effectively for lifetime financial security (Source:Financial Planning defined by Hastings etal.2012). More capital infusion is required by the organisations and governments towards financial literacy workshops, seminars at the school, college, workplaces and the residential areas so as to boost up its effectiveness on the usage of financial products and services and thereby enhancing the financial system of the nation or even positive scope for individuals and organisations as well.
This is only possible when people are introduced to concepts of savings, debt, taxation, not to mention the fundamentals of banking, insurance, debt management, etc at a young age in the school curriculum. If people are dropouts or any one has not enrolled in school then the role of civil societies or NGO’s ,governments will come in place to teach people about importance and techniques of financial wellness. Since there are no formal structures in our education system (unless you are a student of finance), the workplace can become an ideal place for people to learn and acquire financial knowledge.
Financial wellness is a big concept. It is like looking at the bigger picture but when you do that you cannot ignore the smaller bits which help in making the picture whole. Spending carefully, budgeting, saving, financial literacy and financial independence are these smaller parts of the bigger picture of financial wellness. So, understand the importance of all these smaller parts so that the big picture is whole and complete.
Written by Dega.Ramya Tulasi who is a Master's Student Specialized in Financial Economics from the University of Madras and also working with RS as Research and Development Executive.
Disclaimer: The views and opinions expressed in this article are borne by the author and do not necessarily reflect the opinions and views of the Reimagining Society.