Posted on 01/06/2003 11:33:43 AM PST by new cruelty
NEW YORK - More people with mounting debt are turning to their employers for help, and companies are responding by offering workshops, call centers, and online tools to help their employees get a handle on their finances.
That's because helping their employees' bottom lines also helps protect their own. With household debt and personal bankruptcies at record levels, companies could soon find themselves spending more time and money dealing with their work forces' problems.
Total consumer debt in America is now over $1.7 trillion, up from $1.2 trillion in 1997, according the Federal Reserve (news - web sites). And an estimated 1.5 million bankruptcies are expected to be declared for 2002 — a 25 percent increase over 2000.
Ceridian LifeWorks, which provides employee assistance services to companies, said its counselors have been fielding more questions related to debt management.
"We're getting calls from people that are in a lot more dire straits in terms of their finances due to layoffs," said Jonathan Hefner, a financial team manager at the Minneapolis firm. Although financial problems typically make up a small percentage — about 15 percent — of Ceridian's cases, that percentage has increased over the last few years as more firms ask for help for its employees, he said.
Corporate clients have "come to us concerned about employees over their heads in debt," Hefner said. "A lot of their employees are taking funds out of their 401(k) plans," depleting 401(k) resources overall, he noted. Moreover, employees with serious debt are less productive at work and tax their firms' human resources groups.
About 44 percent of calls to the helpline of Financial Finesse, a provider of financial education, in the third quarter were related to debt. In response to companies' requests, the San Francisco firm is conducting debt-management workshops as well as phone counseling services. A few companies are currently evaluating the firm's services because of "extremely high levels of garnishments, payroll advances and 401(k) loans," noted Liz Davidson, its president.
A study conducted by the Military Family Institute in 1997 estimated that employee financial problems cost the Navy more than $250 million a year.
Human resources departments are also likely to be more stretched as managers spend more time processing loans against 401(k) plans or handling wage garnishments. For example, a greater percentage of companies are handling court-ordered wage garnishments requests against employees' wages, said Jim Medlock of American Payroll Association.
For the employee, the key to managing debt is to take preventive steps before it grows out of control. Usually, by the time an employee seeks help — either through their employers' plans or a credit counseling agency — it's usually too late, experts said.
Setting a budget and a goal for when you want to be financially independent is one of the first steps. If buying a new car means that you'll have to work for a few more years, then "people begin to see the price tag of being financially independent," said Lorraine Decker, president of Decker & Associates Inc., a Houston consulting firm that specializes in corporate-sponsored financial education and counseling.
Taking out a loan against your 401(k) plan can be risky. If you lose your job, you'll have to pay back the amount of the loan, plus any taxes and penalties, Decker said.
Be sure to take advantage of any assistance or counseling services that are offered through your employer. Many employee assistance providers, or EAPs, are adding debt counseling to their list of the services they provide to their corporate clients.
(Excerpt) Read more at story.news.yahoo.com ...
Setting a budget and a goal for when you want to be financially independent is one of the first steps.
This is the key to accumulating wealth. Quit living only for today. Set wealth goals and stick to it.
I'm thankful I learned this early in life. I'm retiring at 42 and traveling the world indefinitely.
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