401k advisors struggle with industry terms—how they’re defined, their “buzziness” and whether sponsors and participants understand their meaning.
Retirement readiness, deferral rates, auto this and that are all recent examples, and their overuse risks client alienation, stunted retirement savings and a loss of business.
Thankfully Greenspring Advisors is here to help, at least with two of the more commonly used 401k phrases; “financial wellness” and “financial well-being.”
The Towson, Maryland-based firm is out with its 2019 employee financial wellness survey, Seeking (k)larity, which finds that “45% of people experience regular financial stress which affects their satisfaction, engagement, productivity and alignment,” according to Managing Director Josh Itzoe.
Part of the report addresses the two terms directly and lists important characteristics of each.
“While the terms ‘financial wellness’ and ‘financial well-being’ are similar but they mean different things,” it reads. “Financial wellness is more action-oriented and is the positive steps a person can take to lead a healthier financial life. Financial well-being is more of a holistic, emotional state that focuses on contentment, balance, positivity and confidence.”
Said differently, financial wellness is process-focused (“what you do”) and financial well-being is outcome-focused (“how you feel”).
Financial wellness defined
- Centered around actions
- Process-focused
- The combination of positive steps you take in order to lead a healthier financial life (“what you do”)
- Having a written financial plan
- Having enough money in emergency savings
- Paying off credit cards every month
- Saving enough for retirement to meet monthly retirement income needs
- Investing prudently and appropriately
- Having enough insurance coverages
- Having an estate plan
Financial well-being defined
- Centered around emotions
- Outcome-focused
- More holistic and focused on contentment, balance, positivity and confidence (“how you feel”)
- Do you experience financial stress?
- Does that stress impact your health, relationships and/or work quality or attendance?
- Are you worried about debt?
- Do you feel like your employer cares about you?