A major cause of employee stress, poor job performance, loss of time, health problems, and low savings participation, is a lack of financial knowledge and understanding. This was the finding of a Sttate Street Global Advisors participation survey.

When it comes to employee financial knowledge, 9% of respondents rated themselves as “extremely knowledgeable, 39% described themselves as “fairly knowledgeable” and 33% chose “somewhat knowledgeable.” Only 16% said they were “slightly knowledgeable” and 3% revealed that they were “not at all knowledgeable” when it came to understanding their personal finances.

It is clear from these figures that there is plenty of room for improvement when it comes to bringing employees up to speed on how they can handle their personal financial matters. The end result will benefit both the workers and their employers.

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One of the first steps for employees to become financially literate is to develop a personal spending plan. The budgets are strategies that allow your employees to get the most out of their dollars for the purpose of achieving various personal financial goals. Spending plans offer control over finances by clearly showing how much income is being received, and on what it is being spent. Once areas are discovered where money is being needlessly spent, adjustments can be made so that more money can be funneled toward financial goals.

As LearnVest.com founder and CEO Alexa von Tobel once put it, “A good financial plan is a roadmap that shows us exactly how the choices we make today will affect our future.” Employers have a prime opportunity to provide that financial road map, and help employees create a clear path to financial well-being while strengthening the company’s performance.

There are several steps that workers should take to produce an effective spending plan:

1. List all monthly income.
2. List all monthly expenses.
3. Subtract expense total from income total.
4. List priorities and goals.
5. Review findings. If there is little to no extra income to apply toward priorities and goals, adjustments should be made by eliminating unnecessary expenses and applying the money elsewhere.
6. The plan should then be reviewed every few months to determine if goals are on track and to see where further adjustments can be made.

Also see: “A stronger financial future starts the first on the job

Employees can realize a great deal of relief once they are able to see their income-to-expense ratios in written form. People have a tendency to float through life and spend frivolously without giving much attention to where those few extra dollars go. A simple spending plan offers a glimpse into wasteful purchases and provides a clear guideline for smarter spending decisions. Implementing a proper savings plan can free up substantial income in day-to-day finances that can then be placed toward goals such as a retirement savings plan.

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Mark Singer

Mark Singer

Singer, CFP, is the author of three books, a frequent public speaker and the creator of The Financial Literacy Toolbox.