The All-Too-Common Financial Problem Facing Employees

Last month we shared an article on how 64% of people surveyed by the National Financial Educators Council (NFEC) had nowhere to turn for expert coaching when making financial decisions. In this article, we’re looking closer at “winging it” when making financial decisions. This common approach creates ramifications that can last for years.

drawing of employee with head on desk

Joe’s tax refund dilemma

For demonstrative purposes, we will use Joe as an example. Joe is a single, 25-year-old customer service manager at a health care company. Joe received a $2,500 tax refund this year. He is stoked about splurging on a new 80″ TV he saw on sale. He is excited by thoughts of watching sports with his buddies and how impressed his significant other will be. 

Unfortunately, Joe has a sizable chunk of debt. He has racked up $2,500 on a credit card. That charge is from a recent college alumni ski trip to Colorado. He also must make payments on a recent 401(k) loan of $10,000. Joe’s debt worries him, but he does not realize the long-term implications of his current financial situation. 

He has no idea how much the 21% interest on his credit card adds up to in dollars. Nor does he realize the risks of not paying back his 401(k) immediately. He has not even considered what would happen if he were to get laid off or if he quit his job. Joe does not have a financial professional to turn to for advice on how to wisely use his tax refund. 

Joe “wings it”

With no one to turn to for advice, Joe “wings it” and purchases the $2,500 TV. He only thought of the “good times” he will have with a bigger TV. However, Joe misses the opportunity to put that money towards paying off his credit card. He only makes the required $50 payment every month thinking that is enough. But it will take him 116 months (more than 9 years) to pay off his credit card debt. Furthermore, Joe will pay a whopping $3,269 in interest. And that is if he does not put anything else on his credit card.

But what if Joe had a financial professional to talk to?

But what if Joe had consulted a BrightDime financial coach to help him make the best financial decision for him? How would he have used his $2,500 tax refund? His personal coach would have looked at his entire financial situation and reviewed his goals. One of those goals is to buy a house within the next 10 years. After assessing Joe’s situation, the financial coach would have recommended that he pay off the debt. Why? The joy of buying a new TV would wear off quickly, but the financial effects of paying off his debt would carry forward. This strategy would put him in a much stronger position to buy his future house within his timeline. 

Taking a casual approach to finances, as Joe did, happens far too often. It happens because most people do not have a professional to assist them with key financial decisions. For an employer, offering BrightDime’s financial wellness solution will provide employees a combination of targeted education, on-demand coaching, and personalized money tools tailored exactly to their financial needs. Employees can finally make smarter financial decisions now, for a much brighter future. 

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