7 Wellness
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Differentiate between financial health and financial wellness;
2. Identify the challenges confronting „emerging‰ adults in their quest
for financial wellness;
3. Discuss the elements of financial wellness; and
4. Construct a financial fitness plan.
INTRODUCTION
As discussed in the previous Topic 3, financial health and wellness is one of the
eight dimensions of the holistic model of health and wellness. Can you still
recall? Take note that each of the eight dimensions has to be pursued
individually but in tandem with the pursuit of the other seven dimensions.
What are you going to learn in this topic? Basically, this topic is organised into
four subtopics. In subtopic 7.1, we will be introduced to financial health and
financial wellness. It also discusses the importance of financial wellness in the
context of oneÊs total health.
Then in subtopic 7.2, we will discuss the challenges to the attainment of financial wellness particularly during oneÊs passage to adulthood. Knowledge of past
challenges (which had been experienced by past generations) will enable one to be better prepared to circumvent them as one travels through glitches in life.
This is followed by subtopic 7.3 which discusses the elements of financial
wellness that would be of help as one strives to attain wellness. Lastly, the final
subtopic concludes with the concept of financial fitness, which is in vogue among
major corporations around the world to help defray the cost of attainment of
health and wellness to the corporations and their respective constituents alike.
Hopefully, by the end of this topic, you will be able to construct a financial fitness
plan that suits you. All the best!
7.1 FINANCIAL HEALTH AND WELLNESS
This first subtopic explains financial health and financial wellness. Hopefully, by
the end of this subtopic, you will be able to differentiate between the two. Now,
let us look at the definition of financial health first. Do you have any idea what it
means?
Financial health is a term used to denote „the state of oneÊs personal financial
situation‰.
Take note that there are many dimensions of financial health, for example,
disposable income, savings and loan repayments. In addition, the concept is
embedded in the practices of organisations.
How do we determine the financial health of business organisations? Financial
health of business organisations is determined by examining their:
(a) Financial conditions (what the firm has) such as assets;
(b) Liabilities (what the firm owes); and
(c) Net worth (net amount of what the firm has after taking into consideration
the claim of lenders on what the firm has).
Apart from knowing the absolute amount of each item, it is also important to
know its relative composition. However, these items showed their respective
position at one point in time. Other important aspects to consider are dimensions
which show potential improvements or otherwise, of these items over time. This
dimension is essentially pictured by the profitability of the firm. This is because
profitability is an important determinant of the firmÊs future finances or its
wellness.
How about financial health of individuals? Similarly, it is a description of how
well one deals with his or her finances, like making timely payments and setting
aside a certain amount for savings.
Now let us move on to financial wellness. Financial wellness of individuals, on
the other hand, is a more holistic description. It denotes „the state of
psychological well-being in which one feels they have control over their
respective current finances as well as future finances.‰
Did you know that financial wellness is a new concept that came as an aftermath
of the global Great Recession of 2008 to 2009? The turmoil of the Great Recession
left many feeling vulnerable. Many people were ill-prepared to handle the
experience of personal financial crisis that ensued.
The two years of the Great Recession was not the only cause of the personal
financial crisis. The effect of the recession on individuals was compounded by
the widespread lack of appreciation of the basic underlying principles of good
personal finance practices. As a consequence, poor financial results were
experienced.
What are the impacts of the poor financial state? The impacts of the poor
financial state that resulted were compounded by widespread job losses,
declining asset values and great drops in value of savings. These adverse
phenomena left many in a state of financial distress. What does financial distress
mean?
Financial distress is a term in corporate finance which describes a situation
where a company fails to honour its promises to pay its creditors according
to the agreed term of credit.
What happens if financial distress cannot be relieved? If financial distress cannot
be relieved, it may lead to bankruptcy.
Consequentially, the concept of financial well-being came about as an important
dimension of health and wellness. Generally, financial wellness is a state of
financial affairs where an individual has achieved the following:
(a) Strong financial foundation with little or no debt, with some emergency
savings fund and surplus income over expenditure;
(b) An ongoing plan that puts one on track to reach future financial goals; and
(c) Absence of financial stress.
ACTIVITY 7.1
Go to University of Wisconsin-River FallsÊs website and take the
wellness assessment test at https://goo.gl/rPHR1s. Answer each
question honestly and reflect whether you could have been better off if
each of the said practice has been observed fully.
7.1.1 Importance of Financial Wellness in the Context of One’s Total Health
Lien (2012), in introducing his Primal Finance Series, employed MaslowÊs
hierarchy of needs to illustrate the building block of personal financial fulfilment
and happiness. Following Maslow, Lien felt that it is hard for one to achieve
professional success if he or she is devoid of „a meaningful place to live in,
clothes to wear or food to consume. Fulfilling basic needs are mostly required
before trying to satisfy higher order desires.‰ Lien thus laid the basic foundation
of his series on MaslowÊs hierarchy of needs.
For our purpose, it makes sense to use it as building blocks for reaching personal financial wellness. Let us review Maslow's hierarchy of needs shown in Figure 7.1.
Figure 7.1: Maslow's hierarchy of needs
Source: https://jimlien.files.wordpress.com
Maslows hierarchy of needs is a psychological model based on analysing human
needs and trying to fulfil them in a pecking order.
Overall, the pecking order of needs is described in Table 7.1; it starts from basic
to the most advanced.
Table 7.1: Maslow's Hierarchy of Needs
Level Type of Needs Specific Needs
1 Physiological Breathing, food, water, sex, sleep, homeostasis and
(most excretion. Not unsurprisingly, these are health related
basic issues. Why would you try to attain something higher
needs) than health if you have none to enjoy?
2 Safety The security of body, employment, resources, morality,
family, health and property. Much of these have to do
with externalities, primarily political. Most importantly,
is there a system of morality established in my place of
residence in which I feel safe in regards to myself and
my family? If I earn something, do I get to keep it? Are
there sufficient opportunities to earn a living to provide
for my family?
3 Love/belonging Humans are social creatures. Most of the very successful
people are connectors. They help people meet other
people who can then provide some sort of value in a
mutually beneficial way.
4 Esteem Self-respect, confidence, strength, mastery, independence
and freedom. Esteem ultimately comes from having good
relationships, practice and experience.
5 Self-actualisation This means reaching full potential. By using Maslow as
(most a model, you can determine where you should focus
advanced your first efforts in financial enlightenment; it is a good
needs) way to start.
Source: Lien (2012)
SELF-CHECK 7.1
Briefly describe MaslowÊs hierarchy of needs based on the five different levels.
ACTIVITY 7.2
In small groups, discuss how you would explain the „financial
happiness‰ in the context of Maslow hierarchy of needs.
7.2 CHALLENGES TO FINANCIAL WELLNESS
Now we come to look at the challenges to financial wellness. It is hoped that by
finding out more about these challenges, you can design plans which can help
you remove obstacles to lay the foundations for your financial wellness.
Let us reflect on this question: At what age do you think one is expected to be
financially independent? Well, one is expected to be financially independent as
one enters adulthood. This is because as a legal adult, he or she is a person who
has attained the age of majority and is therefore regarded as independent, self-
sufficient and responsible.
Did you know that adulthood can be identified by using a marker? The passage
from adolescence to adulthood is marked by the experience of particular life
events. So, what are they? Traditionally, the major markers have been identified
as these life events (see Figure 7.2).
Figure 7.2: Four experiences to mark adulthood
In the past, up to the era of baby boomers (born between 1946 and 1964), the
passage to adulthood had been rather smooth. The emerging adults would have
acquired the finesse of adulthood primarily through direct guidance and support
from parents.
7.2.1 Economic Challenges
The majority of Generation X-ers (born between 1965 and 1980) and boomers
believe Generation Y or Millennials (born after 1980) face more economic
challenges than they themselves had faced when they were first of age (Pew
Research Centre, 2014).
The more trying conditions faced by Millennials themselves have caused them to
be realistic about their relative positions. A research poll in 2014 revealed that
only 42% of the Millennials identify themselves as „middle class‰, whereas 53%
of their fellow Millennials in an earlier poll (which was in 2008) had claimed
themselves to be so. In fact, more strikingly, 46% of them described themselves as
of lower than middle class in the recent survey (Pew Research Centre, 2014).
7.2.2 Other Challenges
Do you realise that there are more major developmental changes and challenges
associated with the period of adolescence? For example, the millennial youths
have to acquire and consolidate their competencies, attitudes, values and social
capital necessary to make a successful transition into adulthood.
Late adolescence and the period that follows (often referred to as emerging
adulthood), have been noted as particularly important. It constitutes a stage for
continued development as individuals begin to make choices and engage in a
variety of activities that are potent influences for the rest of their lives.
Take note that as youth move into emerging adulthood, their choices and
challenges shift. This includes decisions related to the traditional markers of
adulthood as shown in Figure 7.2.
Recently, social scientists have found that the transition to adulthood is taking
longer to complete. This is because becoming an adult today (for Generation Y
and Millennials) is totally different from 30 years ago. This can be related to some
of the contributing factors which include the following (Richardson, 2015):
(a) New economic landscape;
(b) Changed perspectives; and
(c) An altered path to professionalism.
Nonetheless, the Millennials are almost as optimistic of their financial futures as
Generation Xers were when they were of comparable age. Those who were
employed then were confident that they were earning enough to live the life that
they aspired while those who were not employed were bullish about their
financial futures (Pew Research Centre, 2015).
Even though emerging adults who had not moved out realised that they were
pulling clear of their adolescent struggles and starting to feel responsible for
themselves, they still had to cling to the lifeline of their accommodative parents
(Munsey, 2006).
According to Munsey, Arnett (2000) thus proposed a new period in lifespan that
he called „emerging adulthood‰. This emerging adulthood has certain distinct
characteristics as described in the following Table 7.2.
Table 7.2: Five Characteristics of Emerging Adulthood
Characteristic Description
Age of identity Young people are deciding who they are and what they want out of
exploration work, school and love.
Age of The post-high school years are marked by repeated residence
instability changes. As young people, they either go to college, or live with
friends or a romantic partner. For most, frequent moves end as
families and careers are established in the 30s.
Age of self- Freed of the parent and society-directed routines of school, young
focus people try to decide what they want to do, where they want to go and
who they want to be with before those choices get limited by the
constraints of marriage, children and a career.
Age of feeling Many emerging adults say they are taking responsibility for
in between themselves, but still do not completely feel like an adult.
Age of Optimism reigns. Most emerging adults believe they have good
possibilities chances of living „better than their parents did‰ and even if their
parents separate, they believe they will find a lifelong soulmate.
Source: Arnett (2000)
According to Arnett (2000), emerging adults pin their hopes from life a job that
is well paid and personally meaningful, and a lasting bond with a partner.
However, Arnett is pessimistic many might be headed for disappointment.
Most employers simply want someone who can get a job done. If happiness is the
positive difference between what you actually get and what you expect out of
life, then a lot of emerging adults are setting themselves up for unhappiness
(Munsey, 2006).
7.2.3 Contributing Factors to Delayed Adulthood
What are the factors that contribute to delayed adulthood? Well, let us find the
answer in Figure 7.3.
Figure 7.3: The factors that contribute to delayed adulthood
These factors are further explained as follows:
(a) Economic Landscape
Have you ever worked in a factory during school break or semester break?
Most of you would say „yes‰. Am I right? In the past, even before
completing school, many teenagers could work in factories, earning enough
money to support themselves or family. The farsighted few would go to
college and enjoy the benefits of say, supervising the production lines.
However, over time, local openings became scarce as manufacturing
establishments flew to cheaper jurisdictions.
Aspiring school leavers soon realised they needed to scale up hence to
college. With time, it is commonly seen that one needed to pursue tertiary
education to make it. College attendance thus soared.
However, with college attendance, debt ensued. Add to it the rising costs of
living, food, accommodation and transportation. So, it is not a big surprise
that young people often do not settle into careers and family until after their
mid-twenties. The reason is that they simply do not have the money. The
dominating factor is that it is taking longer for young adults to transition into
adulthood. This transition period has been labelled as the „emerging
adulthood‰ by some or as „in-between age‰ by others (Richardson, 2015).
(b) Housing Issue
Did you notice that millions of young adults live with their parents? Do you
know why? In fact, some young adults have failed to grasp life bravely
while others just do not have the money to live independently.
(c) Unemployment and Underemployment
Did you know that nearly 75 million young people worldwide are
unemployed? In fact, the global youth unemployment rate has remained at
12.6% since 2009.
In Malaysia, the youth unemployment rate has remained high since the
Asian financial crisis of 1998. From a low of 6.7% in 1996, the youth
unemployment rate shot up to 11.3% in 2010.
Even graduate unemployment rate which did not exceed 2.3% in the early
1990s before the Asian financial crisis, has since not gone anywhere below
2.9%.
These figures have not yet taken into account the millions of young people
who are underemployed. In addition, the cost of living, housing, healthcare
and childcare are rising too, against the backdrop of increasing
unemployment and underemployment. Topping it up is the impending
shrinking of job opportunities among aspirants caused by higher retirement
age (Asia Pacific Youth Employment Network, 2012).
(d) New Approach to Relationships
The social and economic changes that contributed to the rise of emerging
adulthood include the transition from a manufacturing economy to an
economy based mainly on information, technology and services. This has
caused more and more young people to pursue longer post-secondary
education in order to prepare themselves for jobs in the new economy.
Therefore, this means later ages of entering marriage and parenthood, and
widespread acceptance (or at least tolerance) of premarital sex and
cohabitation following the invention of the birth control pills in the 1960s.
Remember, none of these changes is likely to be reversed in the expected
future. For this reason, it makes sense for us to see emerging adulthood as a
new life stage rather than as a generational shift that will soon shift again
(Richardson, 2015).
Take note that besides the four factors discussed just now, there are two other
factors that contributed to delayed adulthood too (refer to Figure 7.3). They are
described as follows:
(a) Destabilising Behaviours
These behaviours can be divided into two types:
(i) Vicarious Influence
Do you agree that young adults are more susceptible to the influence
of celebrities rather than their elders? In other words, they tend to
follow celebrities. As Boon and Lomore (2006) said „adolescents often
form strong attachments to figures they encounter in the popular
media.‰
Sports stars are also recognised as favourite celebrity role models for
many young individuals. Athlete role models are known to influence
adolescentsÊ behavioural intentions, especially with respect to relevant
products (see Figure 7.4).
Figure 7.4: Christiano Ronaldo for Nike advertisement
Source: http://www.nike.com
With respect to this, results of relevant research replicated locally
found that both direct and vicarious role models influence the
purchasing intentions and behaviour of Malaysian adolescents. In
fact, the findings suggest that vicarious role models play a more
influential role then the direct (parental) role models (Cyril de Run,
Butt & Chung, 2010).
Furthermore, the result seems to be at odds with the eastern values
and culture believed to be well entrenched among Malaysians.
Probably, it may be the effect of the following:
? Phenomenal economic growth that Malaysia enjoyed during the
last three decades; or
? Industrialisation and presumably westernisation of the Malaysian
society have somehow influenced the cultural values of emerging
adults.
(ii) Impulsive Buying
What does impulsive buying refer to? Impulsive buying refers to
purchases of goods and services that one had not planned to buy.
Traditionally, impulse buying occurs in stores as a result of display
strategies and personal selling strategies employed by retailers.
Let us reflect on the following two scenarios (refer to Table 7.3).
Table 7.3: Two Scenarios for Your Reflection
Scenario Description
Scenario Have you experienced buying candy and chocolates that you have never
A planned to buy? However, you simply bought them upon noticing them at
the cashier while you were about to pay for things that you had planned to
purchase (see Figure 7.5).
Figure 7.5: Checkout counter
Source: http://www.novograf.co.uk
Scenario Have you experienced buying things online and while you are doing so, your
B attention was directed to a display „customers who purchase what you are
purchasing also purchase these‰ (refer to Figure 7.6).
Figure 7.6: Online shopping strategy
Source: http://www.lazada.com.my
What can you conclude about these two scenarios? Well, for Scenario A,
retailers are emulating the display strategies and personal selling strategies
of „brick and mortar‰ retailers. As for Scenario B, beware of buying things
you have never planned to but impulsively did so because you have been
prompted.
(b) Potent Force
The last factor for our discussion is potent force. Did you realise that
Generation Y is also considered a potentially large labour force? In fact,
they are capable of forming a pattern of socio-economic development
among various generations of a pluralistic society. Furthermore, they live in
a world of technology and the Internet.
Therefore, they always want something challenging and do not wish to be
bored with the same daily routine. They have their own favourite social
activities and most of them live in a world where they can connect and
interact in a global borderless way (Alwi, Amir Hashim & Ali, 2015).
Currently, Generation Y dominate more than 50% of the workforce or about
21% of MalaysiaÊs 29 million population (PriceWaterhouseCoopers, 2015).
ACTIVITY 7.3
1. „Emerging adulthood is a new life stage in oneÊs life cycle.‰ What
do you think of this statement? Discuss the distinctive features of
this „new life stage‰ and their implications on individualsÊ strive
for financial wellness.
2. Read the following article and discuss in groups:
The Malaysian Insider (15 October 2015), Malaysia Gen Y in debt,
living on the edge, survey reveals at http://goo.gl/Sb6dd7
7.3 ELEMENTS OF FINANCIAL WELLNESS
Now let us move on to identify the elements of financial wellness. It is hoped that
by the end of this subtopic, you will be able to understand them better.
Firstly, look at this finding from Financial Finesse (2013) taken from Yahoo
Finance website.
62% of those surveyed who are under 30, report that they have „some‰
financial stress, and another 15% say that they have „high‰ or overwhelming
levels of financial stress.
How do we relate financial stress with financial wellness? Well, let us look at
financial wellness first. What does financial wellness mean? Simply put, financial
wellness may be defined as a state of being wherein a person can fully meet
current and ongoing financial obligations, feel secure about their financial future
and is able to make choices that allow him or her to harvest lifeÊs enjoyment.
In addition, financial wellness is based on a continuum ranging from severe
financial stress to being highly satisfied with oneÊs financial condition. Some
people may seem to have, and feel they have, a high level of financial wellness
even though they may seem far from affluent.
On the other hand, some who seem wealthy may not appear to have, or feel they
enjoy, a high level of financial well-being.
The goals and vision of a satisfying life differs greatly among individuals.
However, there are two common themes that come up consistently security
and freedom of choice whether in the present or in the future (Consumer
Financial Protection Bureau, 2015).
Now let us redirect our attention to the elements of financial wellness. There are
four elements of financial wellness as shown in Figure 7.7.
Figure 7.7: Four elements of financial wellness
These four elements are further described as follows:
(a) Having Control Over Day-to-Day, Month-to-Month Finances
Individuals who at of a relatively high level of financial well-being feel in
control of their day-to-day financial life. These individuals manage their
own finances are able to cover expenses and pay bills on time, and do not
worry about not having enough money to go by.
(b) Having the Capacity to Absorb a Financial Shock
Individuals who are at a relatively high level of financial well-being also
have the capacity to absorb a financial shock. They are able to cope with the
financial challenges of unforeseen life events.
(c) Being on Track to Meet Financial Goals
Individuals experiencing financial well-being are also said to be on track to
meet their financial goals. They have a formal or informal financial plan
and actively work towards goals such as saving to buy a car or home,
paying off student loans, or setting aside funds for retirement.
(d) Having the Financial Freedom to Make Choices to Enjoy Life
Finally, individuals experiencing financial well-being are able to make
choices that allow them to enjoy life. They can splurge once in a while. They
can afford „wants‰ such as being able to go out to dinner or take a vacation,
meeting their „needs‰ and they are able to make choices such as to be
generous toward their friends, family and community.
How do we relate these four elements to the two common themes of financial
wellness? Well, let us look at Table 7.4 for the answer.
Table 7.4: Relationship between Common Themes and Elements of Financial Wellness
Theme Present Future
Security Control over your day-to-day, Capacity to absorb a
month-to-month finances financial shock
Freedom of choice Financial freedom to make choices On track to meet financial
to enjoy life goals
Source: Ratcliffe (2015)
Now, how do we balance this? Well, let us look at Figure 7.8 for an answer.
Figure 7.8: Live by a budget to achieve financial wellness
Here are some suggestions on what you should do specifically:
(a) Sign up for a retirement plan;
(b) Automate your savings;
(c) Establish a „freedom fund‰;
(d) Pay off your debts;
(e) Put your goals in writing;
(f) Track your own credit score (keep old credit card open; pay your bills on
time, every time; avoid full utilisation of credit card eligibility; and keep
below 30% of your available line of credit);
(g) Understand your taxes; and
(h) Manage your finances closely.
Table 7.5 gives you some dos and donÊts to improve your credit scores.
Table 7.5: Dos and DonÊts to Improve Your Credit Scores
Dos DonÊts
? Pay your bills on time. ? Do not be afraid of credit. Using credit
wisely is important to becoming
? Keep your credit card balance low.
financially successful.
? Be patient.
? Avoid extravagance. Keep to the basic
as this will help you lay a stronger
overall financial foundation. Go for
luxury when you are more financially
secure.
? Do not let borrowings get you down.
Some critics question whether a study
loan is worth it. The answer is yes.
Research has shown that an education
loan will pay off over the course of your
career.
? Do not let jom jalan-jalan interfere with
your budget. Be sure to have a written
budget to help keep track of spending
and what you can afford to spend on.
? Be sensitive of your credit rating.
Source: PR Newswire (2015); DiGangi (2015)
SELF-CHECK 7.2
Explain what the elements of financial wellness are.
ACTIVITY 7.4
Share with your course mates whether you possess the elements of
financial wellness or not. Justify your answers.
7.4 FINANCIAL FITNESS
Before we end this topic as well as this module, let us look at financial fitness.
Hopefully by the end of this subtopic, you will be able to evaluate your financial
fitness. Let us begin by looking at the findings from PriceWaterhouseCoopers
(2015).
Over the years employers have learned that improving the health and
wellness of their workforce yields benefits for both employers and employees
alike. Employers enjoy a healthier workforce that is more productive, has
fewer absences and makes fewer demands upon employer-sponsored health
insurance. Employees benefit from improved health and well-being, and
reduced medical expenses.
From these statements, we can conclude that financial wellness programmes can
educate employees about the financial risks they face and provide tools to
manage those risks.
Therefore, workplace financial wellness must meet the following criteria in order
to be marketed as a financial wellness benefit (not to be confused with financial
education or financial advice) (Financial Finesse, 2014):
(a) Unbiased Free of sales pitches or conflict of interests;
(b) Designed and delivered by qualified experts who have extensive financial
planning experience;
(c) Delivered as an ongoing process Provide the support and accountability
that employees need to make, sustain and build upon positive financial
habit and behaviours;
(d) Holistic and comprehensive in nature Covers all aspect of financial
planning from debt management to more advanced estate planning;
(e) Personalised to the employee based on their specific needs;
(f) Integrate all employee benefits With guidance on how employees can
most effectively manage their benefits as part of their overall financial
plans; and
(g) Offered as a benefit available to all employees.
Last but not least, below are five elements you need to heed in your financial
budget (see Figure 7.9).
Figure 7.9: Five elements of financial budget
That marks the end of this topic. Hopefully, you have gained some insightful
knowledge on health and wellness, and is now able to come up with a plan to
stay healthy and well (physically and financially). Remember, health is wealth!
ACTIVITY 7.5
1. Evaluate your financial wellness by answering the questions
given. Award yourself 1 for Yes and 0 for No. Tally your score.
Then, ponder over your result with your friends.
(a) Do you pay yourself first? Set aside a certain amount for ?
savings, retirement or investing before you do anything
else.
(b) Do you save at least 10% of your income? Meaning that ?
at the end of each year, you must have set aside more
than one month of your salary for the future.
(c) Have you set aside an emergency fund to cover at least ?
three monthsÊ worth of expenses? This is to soften the
blow if any unpredictable event occurred.
(d) Do you know the exact amount of your debt and the ?
payables?
(e) Do you accelerate the payments of your debt? ?
Remember, debts can snowball as a result of the
compounding process.
(f) Do you have financial goals? Short, medium as well as ?
long-term goals?
(g) Do you have a record keeping system? ?
(h) Do you live within a budget? ?
(i) Do you know your net worth? ?
2. Construct your budget for the current month. Make sure to list out
all the items in your financial health evaluation.
? Financial health is a term used to denote „the state of oneÊs personal financial
situation.‰ There are many dimensions of financial health such as disposable
income, savings and loan repayments.
? Financial fitness is just like physical fitness; one has to do things in certain
ways to be physically fit. Similarly, in order to be financially fit, one must
handle oneÊs finances in a proper balanced manner managing oneÊs
expenses, savings, debts and others in a befitting manner.
? The impact of a poor financial state can be compounded by widespread job
losses, declining asset values, great drops in value of savings. These adverse
phenomena can leave many in a state of financial distress.
? Financial distress is a term in corporate finance which describes a situation
where a company fails to honour its promises to pay its creditors according to
the agreed term of credit. If financial distress cannot be relieved, it may lead
to bankruptcy.
? Markers of adulthood refer to acquisition of social roles and responsibilities
that traditionally mark the process of becoming an adult. These markers
include the following:
Leaving home;
Entering the labour force market;
Marrying or becoming a parent for the first time; and
Assuming financial independence.
? Challenges confronting the emerging adults in their quest for financial
wellness can be categorised into economy challenges. Generation Y or
Millennials (born after 1980) face more economic challenges than Generation
X and Generation Y.
? Emerging adulthood is a phase in oneÊs life span between adolescence and
full-fledged adulthood which is considered to be developmental in nature. It
is a distinct period between 18 and 25 years of age wherein one struggles
with identity exploration, instability, self-focus and feeling in-between.
? There are four elements of financial wellness:
Having control over day-to-day, month-to-month finances;
Having the capacity to absorb a financial shock;
Being on track to meet financial goals; and
Having the financial freedom to make choices to enjoy life.
? Financial wellness programmes can educate employees about the financial
risks they face and provide tools to manage those risks. This can help them to
develop their financial fitness plan.
Adulthood Financial shock
Baby boomers Financial wellness
Emerging adulthood Generation X
Financial distress Generation Y
Financial fitness plan Make choices
Financial freedom Markers of adulthood
Financial goal Millennials
Financial health Pecking order
Financial independence
Alwi, S., Amir Hashim, I. Z., & Ali, M. S. (2015). Factors affecting savings habit
within millennials in Malaysia: Case study on students of TaylorÊs
University . Retrieved from
http://globalbizresearch.org/Malaysia_Conference/pdf/KL539.pdf
Arnett, J. J. (2000). Emerging adulthood: A theory of development from late teens
through the twenties. American Psychologist, 55 (5), 469480. Retrieved
from
http://jeffreyarnett.com/articles/ARNETT_Emerging_Adulthood_theory.
pdf
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LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Differentiate between financial health and financial wellness;
2. Identify the challenges confronting „emerging‰ adults in their quest
for financial wellness;
3. Discuss the elements of financial wellness; and
4. Construct a financial fitness plan.
INTRODUCTION
As discussed in the previous Topic 3, financial health and wellness is one of the
eight dimensions of the holistic model of health and wellness. Can you still
recall? Take note that each of the eight dimensions has to be pursued
individually but in tandem with the pursuit of the other seven dimensions.
What are you going to learn in this topic? Basically, this topic is organised into
four subtopics. In subtopic 7.1, we will be introduced to financial health and
financial wellness. It also discusses the importance of financial wellness in the
context of oneÊs total health.
Then in subtopic 7.2, we will discuss the challenges to the attainment of financial wellness particularly during oneÊs passage to adulthood. Knowledge of past
challenges (which had been experienced by past generations) will enable one to be better prepared to circumvent them as one travels through glitches in life.
This is followed by subtopic 7.3 which discusses the elements of financial
wellness that would be of help as one strives to attain wellness. Lastly, the final
subtopic concludes with the concept of financial fitness, which is in vogue among
major corporations around the world to help defray the cost of attainment of
health and wellness to the corporations and their respective constituents alike.
Hopefully, by the end of this topic, you will be able to construct a financial fitness
plan that suits you. All the best!
7.1 FINANCIAL HEALTH AND WELLNESS
This first subtopic explains financial health and financial wellness. Hopefully, by
the end of this subtopic, you will be able to differentiate between the two. Now,
let us look at the definition of financial health first. Do you have any idea what it
means?
Financial health is a term used to denote „the state of oneÊs personal financial
situation‰.
Take note that there are many dimensions of financial health, for example,
disposable income, savings and loan repayments. In addition, the concept is
embedded in the practices of organisations.
How do we determine the financial health of business organisations? Financial
health of business organisations is determined by examining their:
(a) Financial conditions (what the firm has) such as assets;
(b) Liabilities (what the firm owes); and
(c) Net worth (net amount of what the firm has after taking into consideration
the claim of lenders on what the firm has).
Apart from knowing the absolute amount of each item, it is also important to
know its relative composition. However, these items showed their respective
position at one point in time. Other important aspects to consider are dimensions
which show potential improvements or otherwise, of these items over time. This
dimension is essentially pictured by the profitability of the firm. This is because
profitability is an important determinant of the firmÊs future finances or its
wellness.
How about financial health of individuals? Similarly, it is a description of how
well one deals with his or her finances, like making timely payments and setting
aside a certain amount for savings.
Now let us move on to financial wellness. Financial wellness of individuals, on
the other hand, is a more holistic description. It denotes „the state of
psychological well-being in which one feels they have control over their
respective current finances as well as future finances.‰
Did you know that financial wellness is a new concept that came as an aftermath
of the global Great Recession of 2008 to 2009? The turmoil of the Great Recession
left many feeling vulnerable. Many people were ill-prepared to handle the
experience of personal financial crisis that ensued.
The two years of the Great Recession was not the only cause of the personal
financial crisis. The effect of the recession on individuals was compounded by
the widespread lack of appreciation of the basic underlying principles of good
personal finance practices. As a consequence, poor financial results were
experienced.
What are the impacts of the poor financial state? The impacts of the poor
financial state that resulted were compounded by widespread job losses,
declining asset values and great drops in value of savings. These adverse
phenomena left many in a state of financial distress. What does financial distress
mean?
Financial distress is a term in corporate finance which describes a situation
where a company fails to honour its promises to pay its creditors according
to the agreed term of credit.
What happens if financial distress cannot be relieved? If financial distress cannot
be relieved, it may lead to bankruptcy.
Consequentially, the concept of financial well-being came about as an important
dimension of health and wellness. Generally, financial wellness is a state of
financial affairs where an individual has achieved the following:
(a) Strong financial foundation with little or no debt, with some emergency
savings fund and surplus income over expenditure;
(b) An ongoing plan that puts one on track to reach future financial goals; and
(c) Absence of financial stress.
ACTIVITY 7.1
Go to University of Wisconsin-River FallsÊs website and take the
wellness assessment test at https://goo.gl/rPHR1s. Answer each
question honestly and reflect whether you could have been better off if
each of the said practice has been observed fully.
7.1.1 Importance of Financial Wellness in the Context of One’s Total Health
Lien (2012), in introducing his Primal Finance Series, employed MaslowÊs
hierarchy of needs to illustrate the building block of personal financial fulfilment
and happiness. Following Maslow, Lien felt that it is hard for one to achieve
professional success if he or she is devoid of „a meaningful place to live in,
clothes to wear or food to consume. Fulfilling basic needs are mostly required
before trying to satisfy higher order desires.‰ Lien thus laid the basic foundation
of his series on MaslowÊs hierarchy of needs.
For our purpose, it makes sense to use it as building blocks for reaching personal financial wellness. Let us review Maslow's hierarchy of needs shown in Figure 7.1.
Figure 7.1: Maslow's hierarchy of needs
Source: https://jimlien.files.wordpress.com
Maslows hierarchy of needs is a psychological model based on analysing human
needs and trying to fulfil them in a pecking order.
Overall, the pecking order of needs is described in Table 7.1; it starts from basic
to the most advanced.
Table 7.1: Maslow's Hierarchy of Needs
Level Type of Needs Specific Needs
1 Physiological Breathing, food, water, sex, sleep, homeostasis and
(most excretion. Not unsurprisingly, these are health related
basic issues. Why would you try to attain something higher
needs) than health if you have none to enjoy?
2 Safety The security of body, employment, resources, morality,
family, health and property. Much of these have to do
with externalities, primarily political. Most importantly,
is there a system of morality established in my place of
residence in which I feel safe in regards to myself and
my family? If I earn something, do I get to keep it? Are
there sufficient opportunities to earn a living to provide
for my family?
3 Love/belonging Humans are social creatures. Most of the very successful
people are connectors. They help people meet other
people who can then provide some sort of value in a
mutually beneficial way.
4 Esteem Self-respect, confidence, strength, mastery, independence
and freedom. Esteem ultimately comes from having good
relationships, practice and experience.
5 Self-actualisation This means reaching full potential. By using Maslow as
(most a model, you can determine where you should focus
advanced your first efforts in financial enlightenment; it is a good
needs) way to start.
Source: Lien (2012)
SELF-CHECK 7.1
Briefly describe MaslowÊs hierarchy of needs based on the five different levels.
ACTIVITY 7.2
In small groups, discuss how you would explain the „financial
happiness‰ in the context of Maslow hierarchy of needs.
7.2 CHALLENGES TO FINANCIAL WELLNESS
Now we come to look at the challenges to financial wellness. It is hoped that by
finding out more about these challenges, you can design plans which can help
you remove obstacles to lay the foundations for your financial wellness.
Let us reflect on this question: At what age do you think one is expected to be
financially independent? Well, one is expected to be financially independent as
one enters adulthood. This is because as a legal adult, he or she is a person who
has attained the age of majority and is therefore regarded as independent, self-
sufficient and responsible.
Did you know that adulthood can be identified by using a marker? The passage
from adolescence to adulthood is marked by the experience of particular life
events. So, what are they? Traditionally, the major markers have been identified
as these life events (see Figure 7.2).
Figure 7.2: Four experiences to mark adulthood
In the past, up to the era of baby boomers (born between 1946 and 1964), the
passage to adulthood had been rather smooth. The emerging adults would have
acquired the finesse of adulthood primarily through direct guidance and support
from parents.
7.2.1 Economic Challenges
The majority of Generation X-ers (born between 1965 and 1980) and boomers
believe Generation Y or Millennials (born after 1980) face more economic
challenges than they themselves had faced when they were first of age (Pew
Research Centre, 2014).
The more trying conditions faced by Millennials themselves have caused them to
be realistic about their relative positions. A research poll in 2014 revealed that
only 42% of the Millennials identify themselves as „middle class‰, whereas 53%
of their fellow Millennials in an earlier poll (which was in 2008) had claimed
themselves to be so. In fact, more strikingly, 46% of them described themselves as
of lower than middle class in the recent survey (Pew Research Centre, 2014).
7.2.2 Other Challenges
Do you realise that there are more major developmental changes and challenges
associated with the period of adolescence? For example, the millennial youths
have to acquire and consolidate their competencies, attitudes, values and social
capital necessary to make a successful transition into adulthood.
Late adolescence and the period that follows (often referred to as emerging
adulthood), have been noted as particularly important. It constitutes a stage for
continued development as individuals begin to make choices and engage in a
variety of activities that are potent influences for the rest of their lives.
Take note that as youth move into emerging adulthood, their choices and
challenges shift. This includes decisions related to the traditional markers of
adulthood as shown in Figure 7.2.
Recently, social scientists have found that the transition to adulthood is taking
longer to complete. This is because becoming an adult today (for Generation Y
and Millennials) is totally different from 30 years ago. This can be related to some
of the contributing factors which include the following (Richardson, 2015):
(a) New economic landscape;
(b) Changed perspectives; and
(c) An altered path to professionalism.
Nonetheless, the Millennials are almost as optimistic of their financial futures as
Generation Xers were when they were of comparable age. Those who were
employed then were confident that they were earning enough to live the life that
they aspired while those who were not employed were bullish about their
financial futures (Pew Research Centre, 2015).
Even though emerging adults who had not moved out realised that they were
pulling clear of their adolescent struggles and starting to feel responsible for
themselves, they still had to cling to the lifeline of their accommodative parents
(Munsey, 2006).
According to Munsey, Arnett (2000) thus proposed a new period in lifespan that
he called „emerging adulthood‰. This emerging adulthood has certain distinct
characteristics as described in the following Table 7.2.
Table 7.2: Five Characteristics of Emerging Adulthood
Characteristic Description
Age of identity Young people are deciding who they are and what they want out of
exploration work, school and love.
Age of The post-high school years are marked by repeated residence
instability changes. As young people, they either go to college, or live with
friends or a romantic partner. For most, frequent moves end as
families and careers are established in the 30s.
Age of self- Freed of the parent and society-directed routines of school, young
focus people try to decide what they want to do, where they want to go and
who they want to be with before those choices get limited by the
constraints of marriage, children and a career.
Age of feeling Many emerging adults say they are taking responsibility for
in between themselves, but still do not completely feel like an adult.
Age of Optimism reigns. Most emerging adults believe they have good
possibilities chances of living „better than their parents did‰ and even if their
parents separate, they believe they will find a lifelong soulmate.
Source: Arnett (2000)
According to Arnett (2000), emerging adults pin their hopes from life a job that
is well paid and personally meaningful, and a lasting bond with a partner.
However, Arnett is pessimistic many might be headed for disappointment.
Most employers simply want someone who can get a job done. If happiness is the
positive difference between what you actually get and what you expect out of
life, then a lot of emerging adults are setting themselves up for unhappiness
(Munsey, 2006).
7.2.3 Contributing Factors to Delayed Adulthood
What are the factors that contribute to delayed adulthood? Well, let us find the
answer in Figure 7.3.
Figure 7.3: The factors that contribute to delayed adulthood
These factors are further explained as follows:
(a) Economic Landscape
Have you ever worked in a factory during school break or semester break?
Most of you would say „yes‰. Am I right? In the past, even before
completing school, many teenagers could work in factories, earning enough
money to support themselves or family. The farsighted few would go to
college and enjoy the benefits of say, supervising the production lines.
However, over time, local openings became scarce as manufacturing
establishments flew to cheaper jurisdictions.
Aspiring school leavers soon realised they needed to scale up hence to
college. With time, it is commonly seen that one needed to pursue tertiary
education to make it. College attendance thus soared.
However, with college attendance, debt ensued. Add to it the rising costs of
living, food, accommodation and transportation. So, it is not a big surprise
that young people often do not settle into careers and family until after their
mid-twenties. The reason is that they simply do not have the money. The
dominating factor is that it is taking longer for young adults to transition into
adulthood. This transition period has been labelled as the „emerging
adulthood‰ by some or as „in-between age‰ by others (Richardson, 2015).
(b) Housing Issue
Did you notice that millions of young adults live with their parents? Do you
know why? In fact, some young adults have failed to grasp life bravely
while others just do not have the money to live independently.
(c) Unemployment and Underemployment
Did you know that nearly 75 million young people worldwide are
unemployed? In fact, the global youth unemployment rate has remained at
12.6% since 2009.
In Malaysia, the youth unemployment rate has remained high since the
Asian financial crisis of 1998. From a low of 6.7% in 1996, the youth
unemployment rate shot up to 11.3% in 2010.
Even graduate unemployment rate which did not exceed 2.3% in the early
1990s before the Asian financial crisis, has since not gone anywhere below
2.9%.
These figures have not yet taken into account the millions of young people
who are underemployed. In addition, the cost of living, housing, healthcare
and childcare are rising too, against the backdrop of increasing
unemployment and underemployment. Topping it up is the impending
shrinking of job opportunities among aspirants caused by higher retirement
age (Asia Pacific Youth Employment Network, 2012).
(d) New Approach to Relationships
The social and economic changes that contributed to the rise of emerging
adulthood include the transition from a manufacturing economy to an
economy based mainly on information, technology and services. This has
caused more and more young people to pursue longer post-secondary
education in order to prepare themselves for jobs in the new economy.
Therefore, this means later ages of entering marriage and parenthood, and
widespread acceptance (or at least tolerance) of premarital sex and
cohabitation following the invention of the birth control pills in the 1960s.
Remember, none of these changes is likely to be reversed in the expected
future. For this reason, it makes sense for us to see emerging adulthood as a
new life stage rather than as a generational shift that will soon shift again
(Richardson, 2015).
Take note that besides the four factors discussed just now, there are two other
factors that contributed to delayed adulthood too (refer to Figure 7.3). They are
described as follows:
(a) Destabilising Behaviours
These behaviours can be divided into two types:
(i) Vicarious Influence
Do you agree that young adults are more susceptible to the influence
of celebrities rather than their elders? In other words, they tend to
follow celebrities. As Boon and Lomore (2006) said „adolescents often
form strong attachments to figures they encounter in the popular
media.‰
Sports stars are also recognised as favourite celebrity role models for
many young individuals. Athlete role models are known to influence
adolescentsÊ behavioural intentions, especially with respect to relevant
products (see Figure 7.4).
Figure 7.4: Christiano Ronaldo for Nike advertisement
Source: http://www.nike.com
With respect to this, results of relevant research replicated locally
found that both direct and vicarious role models influence the
purchasing intentions and behaviour of Malaysian adolescents. In
fact, the findings suggest that vicarious role models play a more
influential role then the direct (parental) role models (Cyril de Run,
Butt & Chung, 2010).
Furthermore, the result seems to be at odds with the eastern values
and culture believed to be well entrenched among Malaysians.
Probably, it may be the effect of the following:
? Phenomenal economic growth that Malaysia enjoyed during the
last three decades; or
? Industrialisation and presumably westernisation of the Malaysian
society have somehow influenced the cultural values of emerging
adults.
(ii) Impulsive Buying
What does impulsive buying refer to? Impulsive buying refers to
purchases of goods and services that one had not planned to buy.
Traditionally, impulse buying occurs in stores as a result of display
strategies and personal selling strategies employed by retailers.
Let us reflect on the following two scenarios (refer to Table 7.3).
Table 7.3: Two Scenarios for Your Reflection
Scenario Description
Scenario Have you experienced buying candy and chocolates that you have never
A planned to buy? However, you simply bought them upon noticing them at
the cashier while you were about to pay for things that you had planned to
purchase (see Figure 7.5).
Figure 7.5: Checkout counter
Source: http://www.novograf.co.uk
Scenario Have you experienced buying things online and while you are doing so, your
B attention was directed to a display „customers who purchase what you are
purchasing also purchase these‰ (refer to Figure 7.6).
Figure 7.6: Online shopping strategy
Source: http://www.lazada.com.my
What can you conclude about these two scenarios? Well, for Scenario A,
retailers are emulating the display strategies and personal selling strategies
of „brick and mortar‰ retailers. As for Scenario B, beware of buying things
you have never planned to but impulsively did so because you have been
prompted.
(b) Potent Force
The last factor for our discussion is potent force. Did you realise that
Generation Y is also considered a potentially large labour force? In fact,
they are capable of forming a pattern of socio-economic development
among various generations of a pluralistic society. Furthermore, they live in
a world of technology and the Internet.
Therefore, they always want something challenging and do not wish to be
bored with the same daily routine. They have their own favourite social
activities and most of them live in a world where they can connect and
interact in a global borderless way (Alwi, Amir Hashim & Ali, 2015).
Currently, Generation Y dominate more than 50% of the workforce or about
21% of MalaysiaÊs 29 million population (PriceWaterhouseCoopers, 2015).
ACTIVITY 7.3
1. „Emerging adulthood is a new life stage in oneÊs life cycle.‰ What
do you think of this statement? Discuss the distinctive features of
this „new life stage‰ and their implications on individualsÊ strive
for financial wellness.
2. Read the following article and discuss in groups:
The Malaysian Insider (15 October 2015), Malaysia Gen Y in debt,
living on the edge, survey reveals at http://goo.gl/Sb6dd7
7.3 ELEMENTS OF FINANCIAL WELLNESS
Now let us move on to identify the elements of financial wellness. It is hoped that
by the end of this subtopic, you will be able to understand them better.
Firstly, look at this finding from Financial Finesse (2013) taken from Yahoo
Finance website.
62% of those surveyed who are under 30, report that they have „some‰
financial stress, and another 15% say that they have „high‰ or overwhelming
levels of financial stress.
How do we relate financial stress with financial wellness? Well, let us look at
financial wellness first. What does financial wellness mean? Simply put, financial
wellness may be defined as a state of being wherein a person can fully meet
current and ongoing financial obligations, feel secure about their financial future
and is able to make choices that allow him or her to harvest lifeÊs enjoyment.
In addition, financial wellness is based on a continuum ranging from severe
financial stress to being highly satisfied with oneÊs financial condition. Some
people may seem to have, and feel they have, a high level of financial wellness
even though they may seem far from affluent.
On the other hand, some who seem wealthy may not appear to have, or feel they
enjoy, a high level of financial well-being.
The goals and vision of a satisfying life differs greatly among individuals.
However, there are two common themes that come up consistently security
and freedom of choice whether in the present or in the future (Consumer
Financial Protection Bureau, 2015).
Now let us redirect our attention to the elements of financial wellness. There are
four elements of financial wellness as shown in Figure 7.7.
Figure 7.7: Four elements of financial wellness
These four elements are further described as follows:
(a) Having Control Over Day-to-Day, Month-to-Month Finances
Individuals who at of a relatively high level of financial well-being feel in
control of their day-to-day financial life. These individuals manage their
own finances are able to cover expenses and pay bills on time, and do not
worry about not having enough money to go by.
(b) Having the Capacity to Absorb a Financial Shock
Individuals who are at a relatively high level of financial well-being also
have the capacity to absorb a financial shock. They are able to cope with the
financial challenges of unforeseen life events.
(c) Being on Track to Meet Financial Goals
Individuals experiencing financial well-being are also said to be on track to
meet their financial goals. They have a formal or informal financial plan
and actively work towards goals such as saving to buy a car or home,
paying off student loans, or setting aside funds for retirement.
(d) Having the Financial Freedom to Make Choices to Enjoy Life
Finally, individuals experiencing financial well-being are able to make
choices that allow them to enjoy life. They can splurge once in a while. They
can afford „wants‰ such as being able to go out to dinner or take a vacation,
meeting their „needs‰ and they are able to make choices such as to be
generous toward their friends, family and community.
How do we relate these four elements to the two common themes of financial
wellness? Well, let us look at Table 7.4 for the answer.
Table 7.4: Relationship between Common Themes and Elements of Financial Wellness
Theme Present Future
Security Control over your day-to-day, Capacity to absorb a
month-to-month finances financial shock
Freedom of choice Financial freedom to make choices On track to meet financial
to enjoy life goals
Source: Ratcliffe (2015)
Now, how do we balance this? Well, let us look at Figure 7.8 for an answer.
Figure 7.8: Live by a budget to achieve financial wellness
Here are some suggestions on what you should do specifically:
(a) Sign up for a retirement plan;
(b) Automate your savings;
(c) Establish a „freedom fund‰;
(d) Pay off your debts;
(e) Put your goals in writing;
(f) Track your own credit score (keep old credit card open; pay your bills on
time, every time; avoid full utilisation of credit card eligibility; and keep
below 30% of your available line of credit);
(g) Understand your taxes; and
(h) Manage your finances closely.
Table 7.5 gives you some dos and donÊts to improve your credit scores.
Table 7.5: Dos and DonÊts to Improve Your Credit Scores
Dos DonÊts
? Pay your bills on time. ? Do not be afraid of credit. Using credit
wisely is important to becoming
? Keep your credit card balance low.
financially successful.
? Be patient.
? Avoid extravagance. Keep to the basic
as this will help you lay a stronger
overall financial foundation. Go for
luxury when you are more financially
secure.
? Do not let borrowings get you down.
Some critics question whether a study
loan is worth it. The answer is yes.
Research has shown that an education
loan will pay off over the course of your
career.
? Do not let jom jalan-jalan interfere with
your budget. Be sure to have a written
budget to help keep track of spending
and what you can afford to spend on.
? Be sensitive of your credit rating.
Source: PR Newswire (2015); DiGangi (2015)
SELF-CHECK 7.2
Explain what the elements of financial wellness are.
ACTIVITY 7.4
Share with your course mates whether you possess the elements of
financial wellness or not. Justify your answers.
7.4 FINANCIAL FITNESS
Before we end this topic as well as this module, let us look at financial fitness.
Hopefully by the end of this subtopic, you will be able to evaluate your financial
fitness. Let us begin by looking at the findings from PriceWaterhouseCoopers
(2015).
Over the years employers have learned that improving the health and
wellness of their workforce yields benefits for both employers and employees
alike. Employers enjoy a healthier workforce that is more productive, has
fewer absences and makes fewer demands upon employer-sponsored health
insurance. Employees benefit from improved health and well-being, and
reduced medical expenses.
From these statements, we can conclude that financial wellness programmes can
educate employees about the financial risks they face and provide tools to
manage those risks.
Therefore, workplace financial wellness must meet the following criteria in order
to be marketed as a financial wellness benefit (not to be confused with financial
education or financial advice) (Financial Finesse, 2014):
(a) Unbiased Free of sales pitches or conflict of interests;
(b) Designed and delivered by qualified experts who have extensive financial
planning experience;
(c) Delivered as an ongoing process Provide the support and accountability
that employees need to make, sustain and build upon positive financial
habit and behaviours;
(d) Holistic and comprehensive in nature Covers all aspect of financial
planning from debt management to more advanced estate planning;
(e) Personalised to the employee based on their specific needs;
(f) Integrate all employee benefits With guidance on how employees can
most effectively manage their benefits as part of their overall financial
plans; and
(g) Offered as a benefit available to all employees.
Last but not least, below are five elements you need to heed in your financial
budget (see Figure 7.9).
Figure 7.9: Five elements of financial budget
That marks the end of this topic. Hopefully, you have gained some insightful
knowledge on health and wellness, and is now able to come up with a plan to
stay healthy and well (physically and financially). Remember, health is wealth!
ACTIVITY 7.5
1. Evaluate your financial wellness by answering the questions
given. Award yourself 1 for Yes and 0 for No. Tally your score.
Then, ponder over your result with your friends.
(a) Do you pay yourself first? Set aside a certain amount for ?
savings, retirement or investing before you do anything
else.
(b) Do you save at least 10% of your income? Meaning that ?
at the end of each year, you must have set aside more
than one month of your salary for the future.
(c) Have you set aside an emergency fund to cover at least ?
three monthsÊ worth of expenses? This is to soften the
blow if any unpredictable event occurred.
(d) Do you know the exact amount of your debt and the ?
payables?
(e) Do you accelerate the payments of your debt? ?
Remember, debts can snowball as a result of the
compounding process.
(f) Do you have financial goals? Short, medium as well as ?
long-term goals?
(g) Do you have a record keeping system? ?
(h) Do you live within a budget? ?
(i) Do you know your net worth? ?
2. Construct your budget for the current month. Make sure to list out
all the items in your financial health evaluation.
? Financial health is a term used to denote „the state of oneÊs personal financial
situation.‰ There are many dimensions of financial health such as disposable
income, savings and loan repayments.
? Financial fitness is just like physical fitness; one has to do things in certain
ways to be physically fit. Similarly, in order to be financially fit, one must
handle oneÊs finances in a proper balanced manner managing oneÊs
expenses, savings, debts and others in a befitting manner.
? The impact of a poor financial state can be compounded by widespread job
losses, declining asset values, great drops in value of savings. These adverse
phenomena can leave many in a state of financial distress.
? Financial distress is a term in corporate finance which describes a situation
where a company fails to honour its promises to pay its creditors according to
the agreed term of credit. If financial distress cannot be relieved, it may lead
to bankruptcy.
? Markers of adulthood refer to acquisition of social roles and responsibilities
that traditionally mark the process of becoming an adult. These markers
include the following:
Leaving home;
Entering the labour force market;
Marrying or becoming a parent for the first time; and
Assuming financial independence.
? Challenges confronting the emerging adults in their quest for financial
wellness can be categorised into economy challenges. Generation Y or
Millennials (born after 1980) face more economic challenges than Generation
X and Generation Y.
? Emerging adulthood is a phase in oneÊs life span between adolescence and
full-fledged adulthood which is considered to be developmental in nature. It
is a distinct period between 18 and 25 years of age wherein one struggles
with identity exploration, instability, self-focus and feeling in-between.
? There are four elements of financial wellness:
Having control over day-to-day, month-to-month finances;
Having the capacity to absorb a financial shock;
Being on track to meet financial goals; and
Having the financial freedom to make choices to enjoy life.
? Financial wellness programmes can educate employees about the financial
risks they face and provide tools to manage those risks. This can help them to
develop their financial fitness plan.
Adulthood Financial shock
Baby boomers Financial wellness
Emerging adulthood Generation X
Financial distress Generation Y
Financial fitness plan Make choices
Financial freedom Markers of adulthood
Financial goal Millennials
Financial health Pecking order
Financial independence
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