Decisions, Decisions, Decisions

In making financial decisions (or should we say, just “decisions”, since every decision is financial in one way or another), it’s important for employees to feel comfortable and confident saying “no” to friends and family, but also equally as important that they feel they can say “yes,” too. Money can absolutely ruin relationships, or less dramatically, can be an uncomfortable, sticky topic for many. However, it’s nevertheless an important topic that often needs to be discussed. Employees may benefit from lessons on how to have money-related discussions rather than avoiding these daunting but necessary discussions, and sponsors are in a great place to guide these charged discussions from both an interpersonal perspective, as well as a financial one.
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Saying “No”

Saying no can be hard for many reasons: some people are averse to the conflict that a “no” may instigate, or they feel too awkward, uncomfortable, or embarrassed, or perhaps they suffer from an acute case of FOMO (the Fear Of Missing Out). In all of these cases their emotional states can be the antecedents to poor financial decisions. Learning to identify “no” hesitancy as well as where that emotion is coming from (FOMO, embarrassment, etc.) will help employees figure out what emotional triggers they have that might entice them to overspend.
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If someone is going out with friends to dinner and drinks several nights a week and is hesitant to cut down because they’re worried about their relationships weakening, being able to identify this is the first step to finding alternatives that meet their emotional needs without sacrificing their financial goals. Here they may benefit from learning a script for declining events that involve spending that’s out of budget; for example, a polite decline + optional explanation + alternative is a good stand-by response formula. For example, if they were declining a dinner invite, they might say, “Thanks for the invite to dinner, I’d love to join you! I’m focusing on saving for a down payment on a house, though, so what if we met for drinks beforehand or dessert after instead?” or “Thanks for thinking of me! I’d love to spend time with you, but that steakhouse is a bit out of budget right now. What if we went to dim sum instead? I’ve really been craving soup dumplings!” After identifying the emotional root cause of their overspending behavior (which may vary from temptation to temptation), learning how to communicate openly, honestly, and effectively can not only help employees manage their money and financial wellness better, but can help improve their relationships across the board. In-person practice can help build these skills with partnered activities and mad-libs-adjacent activities where participants submit a relationship type and spending activity which are then drawn and paired at random to really challenge employees to think outside the box and use the power of declining in a creative manner while also maintaining relationships.
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Saying Yes

On the opposite side of the spectrum, there are those who have difficulty saying yes. This is a trait that can often be found in those who have (or had) significant student debt, especially people working multiple jobs to pay it off and pay their rent. It can be difficult to say yes to spending money after training oneself for years, or even decades, to do the opposite; not only that, but as many young adults have never experienced adult life without debt. Many feel that they have to catch up financially after falling behind on their savings due to loan payments, and it may simply make more sense to them to preemptively save before another expensive life milestone like buying a car, a house, or having children, strikes. However, life is for living and enjoying, not just for saving; as the popular saying goes, “you can’t take it with you” so employees should enjoy the opportunities financial freedom quite literally affords them. This is double so if and when they need to retrain themselves into new habits updated to reflect their current financial status.
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Many of the same internal checks and balances over-spenders user can apply to under-spenders as well. “How am I feeling about this? Where is that emotion coming from? What would make it worth it to me?” Learning to identify what their limits are, and knowing when the scale tips from “not worth the emotional and financial investment” turns into “worth my time and money” can help employees ease into the process of saying “yes”, or offering toned-down alternatives as they dip their toes into the spending waters. Unsurprisingly, while these sessions focus primarily on introspection and communication, helping employees create a solid budget is going to bring a measurable, fact-based structured foundation to what can be rather emotionally charged decisions and help provide an easily understood metric as to what type of response is merited.

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‍These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.