The Consumer Financial Protection Bureau (CFPB) defines four key tenets to define financial well-being.
It is helpful to think of these tenets as a hierarchy of financial wellness needs.
THE FINANCIAL WELLNESS HIERARCHY OF NEEDS
Having control over your finances. The first and most crucial tenet of financial wellness is being able to control your own finances. This means being able to pay bills on time, not having unmanageable debt, and being able to make ends meet.
Capacity to absorb an unexpected shock. Secondly, it is important to have a financial “cushion” against unexpected expenses and emergencies. Having savings, health insurance, and good credit are essential to a strong financial well-being.
Saving and Planning for the Future. Following the above, having financial goals—such as paying off one’s student loans within a certain number of years or saving a particular amount towards one’s retirement—and being on track to meet those financial goals is essential to feeling “in-shape” financially.
Ability to make a discretionary purchase. The fourth and final marker of financial stability and wellness is the ability to make choices that allow one to enjoy life. This final step can be measured as having the freedom to take a vacation, enjoy a meal out now and then, or work less to spend more time with family.
Just as in Maslow’s Hierarchy of Needs, these steps move from basic, necessary needs, to psychological, self-fulfillment needs. If steps (1) and (2) are not attended to, it becomes impossible to achieve true financial freedom and set oneself on course to achieve financial stability.
Many financial services companies enable end-users to meet one or more of these needs, and can apply to a portion of the cycle described above. While a daily payment program can also contribute to steps (3) and (4), it is most significant in enabling employees to get started on the most essential steps in this process: (1) Control Over Finances and (2) Capacity to Absorb An Unexpected Shock.
HOW DO EMPLOYEES USE DAILY PAY BENEFITS?
With a daily payment program enabled, an employee can pay their bills on time, manage their debt, and truly make ends meet. They will also be able to access their earned income in case of an emergency, unforeseen health expense, and anything in between that necessitates emergency access to their income.
With these essentials covered, an employee can make great headway in achieving financial freedom and stability. While many programs help employees with various steps in this process, a daily payment benefit clearly enables individuals to take the hardest, first and most essential steps in attaining financial wellness.
Author— Megan Wells, Fintech
Megan Wells is a data journalist and digital copywriter based in San Francisco, California. Wells currently focuses on personal finance, mortgage, and lifestyle content. Wells' work has appeared in publications like Fox, Nasdaq, MSN, and Motley Fool. Wells also spoke at the 2015 Exceptional Women in Publishing conference.
