Monthly Finance Message:

Small Steps Can Make a Big Difference in Financial Well-Being

August 2017

Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension

Financial well-being has been defined by the Consumer Financial Protection Bureau as a state of being where people “can fully meet current and ongoing financial obligations, can feel secure in their financial future, and are able to make choices that allow them to enjoy life.” In other words, having financial well-being means that people feel that they have financial security and financial freedom today and in the future.

Small steps can make a big difference in developing the financial well-being of ordinary people. This includes actions taken with respect to basic financial practices such as budgeting, banking, and borrowing. Below are ten strategies that can build wealth, reduce debt, and improve financial well-being over time:

  • Stop Making Excuses: Common examples include “I don't have enough knowledge,” I don't have enough time,” and “I don't have enough money.” Decide to learn one new thing about personal finance every day and consider completing a simple savings challenge to start saving money on a regular basis.
  • Control What You Can: People can't control the stock market or life events but they can control their responses to them. Examples include selecting low-cost investments such as index funds, diversifying investments, and increasing financial resilience with low debt and an adequate emergency fund.
  • Get Out of Debt: Hunker down and make consumer debt repayment (e.g., credit cards) a priority. Pay more than the required minimum and avoid incurring new debt. Use the PowerPay debt reduction program from Utah State University Extension (see https://powerpay.org/) to create an accelerated debt repayment plan.
  • Live Below Your Means: A good rule to follow to build financial well-being is to “Buy what you need, not what you can afford.” Doing this avoids the problems of mindless spending and “lifestyle creep” where expenses increase to support more lavish lifestyles as discretionary income rises.
  • Invest Wisely: Identify financial goals and risk tolerance and match investment choices to your profile. Manage risk through asset allocation (putting a percentage of overall investment dollars in asset classes such as stocks, bonds, and cash) and diversification (having different investments within each asset class).
  • Pool Your Money: Mutual funds pool the money of many small investors into a large diversified portfolio. Investors are, therefore, able to buy a piece of many securities that they could not afford individually. This is similar to pooling money with others to buy someone a large gift that nobody could afford on their own.
  • Think Long Term: Successful investing is a decades-long venture. It is not timing the market that matters but, rather, time in the market. Follow a dollar-cost averaging strategy by investing regular amounts at regular time intervals. An example is making a $100 mutual fund deposit on the fifth day of every month.
  • Lower Your Tax Liability: Especially for young workers, fund a Roth IRA with after-tax dollars at perhaps the lowest possible income tax bracket that you will be in during your lifetime. You will later make tax-free withdrawals decades later when you will likely be in a higher tax bracket.
  • Negotiate Better Outcomes:Examples of financial items that can be negotiated include various purchases (e.g., a car), credit card interest rates and fees, partial payments for debts, and salaries and fringe benefits.
  • Prepare for the Unexpected: The “unexpected” includes both good events (e.g., marriage and the birth of a child) and bad events (e.g., unemployment and a car breakdown). Preparation strategies include an adequate cash reserve and insurance, low debt, and up-to-date legal documents such as a power of attorney.

Want to take small steps to improve your financial well-being? Consider one or more of the strategies listed above. Every small step that you take to improve your financial well-being makes a difference.


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences