Monthly Investment Message: November 2017

Barbara O’Neill, Extension Specialist in Financial Resource Management

Rutgers Cooperative Extension

November 2017

The Benefits of Financial Health

This article is adapted from a previously written blog post for the eXtension Military Families Learning Network:

After a successful course of treatment, many doctors tell their patients that their physical health status is 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. Financially healthy people with financial well-being are comfortable in the present (e.g., ability to pay bills and freedom to make choices) and on track for a secure future (e.g., resilience to pay for unexpected expenses and 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), being on track to meet goals, and flexibility to make choices. This definition was developed  by reviewing research literature, expert opinion, and in-depth, one-on-one interviews with working-age and older consumers. The CFPB report is available online at


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:


Financial health matters… to everyone. Top 1%, bottom quintile, or any income category in between, the United States is stronger as a country when people are financially healthy:


  • Financially Independent Citizens– Less burden on government services that everyone pays for.

  • Happier People- Less anger about the American Dream slipping away and “haves” vs. “have nots.”

  • Better Physical Health- Resources for healthier eating, medical care, and periodic screening exams.

  • Stronger Economy- Resilience during economic downturns and more investors and shoppers.

  • Fewer Predatory Loans– Less need for high-cost payday and car title lenders and check cashers.


How can Americans build financial health? By doing something- anything- that improves your 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. Other things that build financial health are:


PlanningStudies done by me and others 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 to cover a $400 emergency according to research by the Federal Reserve.


To improve your financial health, start where you are. Set personally meaningful goals and celebrate any positive action as “success.” Financial health matters to everyone. Let’s make it a national priority.


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