Employers have a moral responsibilty to help employees develop financial resilience. How many employees, and co-workers are stifled with personal debt? This series will address three common situations that quickly affect employee resilience: personal debt, physical or mental health problems including substance abuse and elder or child care costs. Here are some good guidelines to help individuals manage debt.
Always pay cash if possible unless the debt provides a clear and distinct tax benefit or leverages the employee into a better financial situation within 12 months. Avoid get rich schemes. If dept is already a problem, sharply cut discretionary expenses, and allocate the savings to pay off debt. Repay debts using one of two strategies: pay the debt with the highest interest rate or pay the smallest debt first. The rationale for the latter is to free up extra money to accelerate payment on another debt. Accelarate payments on one debt at a time to reduce the number of outstanding debts. Employers can provide access to publications about the financial cost of debt and resources or post simple signs. Here is one example:
Ten Financial Warning Signs
Payday or other high interest loans
Gambing and lottery tickets
Not tithing or giving to charity
Paying the minimum payment
High debt to income ratio
Borrowing money to pay off loans
Late or deferred payments
Running low on cash between paydays
No emergency fund
Not contributing toward retirement
It isn't enough to identify warning signs, employers may gather useful information to help educate employees, allow employees to organize and share ideas on cutting costs, avoiding common pitfalls, and explain what they are doing to overcome challenges. Invite speakers to come and talk about bartering, micro enterprise, money management, or lessons learned or how they achieved their financial goals.
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