Monthly Finance Message:

Small Steps to Build Your Financial Health

September 2017

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

When someone is diagnosed with cancer, they normally go through a course of treatment that includes surgery, chemotherapy, hormone therapy, and/or radiation. If they are lucky, after months of treatment, their doctor will describe their physical health status as NED, which is “doctor-speak” for No Evidence of Disease.

The same NED acronym can also be applied to a person's financial health: No Evidence of Distress (e.g, high household debt and negative cash flow). Financially healthy people with financial well-being are comfortable in the present (e.g., ability to pay bills) and on track for a secure future (e.g., savings for financial goals).

According to the Consumer Financial Protection Bureau, there are four elements of financial well-being: feeling in control, capacity to absorb a financial “shock” (e,g., car accident or unemployment), being on track to meet goals, and flexibility to make choices. This definition was developed by reviewing research literature, expert opinions, and in-depth, one-on-one interviews with working-age and older consumers.

Financial health gives people options, opportunity, and the capacity to bounce back from life's inevitable challenges such as unemployment, disability, a car breakdown, a sick pet…or cancer. There are many metrics to measure financial health including incremental changes in net worth (assets minus debts), a cash flow statement (income and expenses), debt-to-income ratios, progress toward the achievement of financial goals, and scores on the Rutgers Cooperative Extension Financial Fitness Quiz: http://njaes.rutgers.edu/money/ffquiz/.

More than half (57%) of Americans struggle financially and 43% have trouble paying bills and credit payments according research by the Center for Financial Services Innovation (CFSI). This translates to 138 million people who are not financially healthy. Instead of NED, there is evidence of financial distress such as spending more than income, paying bills late, and having insufficient emergency and long-term savings.

How can Americans build financial health and achieve NED status? By doing something—anything—that improves their finances. Any step forward is progress. Learning something new about personal finance every day, saving something in a 401(k), and building an emergency fund $1 at a time, if necessary. It all adds up.

Savings is a key factor in financial health. Savings challenges, from $100 a month to $2,500 a year, can get you started. Challenges provide a template to follow and progress points to celebrate along the way. They tell you how much money to save each day or week and for how long. Other things that build financial health are:

Planning- Studies have found an association between planning behavior (e.g., setting goals and making lists) and positive financial practices.

Prevention- Financially healthy people increase their resilience with low debt-to-income ratios and adequate insurance and emergency savings.

Progress- This means “moving the needle” forward every day with positive actions such as saving spare change in a can or jar and reducing expenses to “find” money to repay debt.

Persistence-It generally takes hard work, optimism, and discipline to become financially healthy. Perserverance during tough times and some pain (e.g., spending less to save more) is necessary.

Paychecks- Financial health requires income from an employer and/or self-employment. In later life, savings helps people create a “retirement paycheck” with the money that they gradually draw down from savings.

With financial health comes...

Peace- Knowing you are not a paycheck away from the financial “edge.” Unfortunately, 46% of Americans don't have enough money set aside to cover a $400 emergency according to research by the Federal Reserve.


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