Are your employees overhoused?

I've lamented the adverse effects of overhousing oneself before. Are your employees overhoused? If so, what does that mean for their performance at work?

Let's begin by discussing what it means to be 'overhoused'. I might have made up the word, but it is a real situation. My Ideal Budget recommends you spend no more than 25% of your monthly take-home pay on housing expenses. Let's assume a family is bringing home $5,000 a month, that would leave room for a $1,250 housing budget. Not a bad amount to have for a mortgage, but this amount also includes homeowner's insurance, lawn care, alarm systems, and any other housing expenses (minus utilities) . Sounds like a lot, but you might be surprised at how many people spend significantly more than this per month on housing expenses.

If your employee spends 35% of their take-home pay on housing the extra 10% used has to come from somewhere. It's possible they have no car payment, or very reasonable medical expenses and they can "borrow" money from these categories, but what if they've maxed out other categories? There will be no room for savings, which means there is a good chance when emergencies come up, and they will come up, these employees will have to rely on borrowed money to help them get out of a bind. Borrowed money leads to debt which leads to further cash flow issues.

All of these issues affect work performance. Financially stressed employees equals poor work performance, income dissatisfaction, and stress which overflows to all areas of their lives.

So what is the solution? Educating your employees about best personal finance practices. You can't control your employee's lives, but if you present them with the tools and resources to make smart choices with their personal finances, they in turn will be better employees. Personal finance, is called personal for a reason, but employees rely on you to provide their income, so why not provide them with extra information to help them make the best decision with the money they are given.

For more information about how to best educate your employees go here.