Presentation for Rutgers University Staff, May 2018

1. Financial Wellness:
How to Define It, Assess
It, and Achieve It
Barbara O’Neill, Ph.D., CFP®
Rutgers Cooperative Extension
boneill@njaes.rutgers.edu
@moneytalk1

2. Wellness vs. Well-Being
• Not the same thing but influence each other
• Wellness is the sum of positive steps taken to lead a
healthier life (body-focused: physical health)
– Focus on disease prevention and health assessments
• Well-being is focused on holistic life experience (Are
you content and do you find your life fulfilling?)
– Broader focus including mental state, social networks,
spirituality, job productivity, and overall contentment
• Better Wellness = Higher Well-being
http://www.lifedojo.com/blog/employee-wellness-vs.-wellbeing-whats-the-difference
https://www.huffingtonpost.com/alan-kohll/is-there-a-difference-
bet_2_b_11112402.html

3. Wellness Wheel Activity

4. Five Related Personal
Finance Status Concepts
• Financial Capability
• Financial Fitness
• Financial Health
• Financial Well-Being
• Financial Wellness
All five concepts have similarities and are used to measure
financial attitudes, behaviors, characteristics, and status
– There are other terms too (financial literacy, stability, security, etc.)

5. Financial Capability
• “The combination of attitude, knowledge, skills, and self-
efficacy needed to make and exercise money management
decisions that best fit the circumstances of one’s life within
an enabling environment” (Center for Financial Inclusion)
• “The capacity, based on knowledge, skills, and access, to
manage financial resources effectively” (Prosperity Now)
• “A multi-dimensional concept that encompasses a
combination of knowledge, resources, access, and habits”
(FINRA Investor Education Foundation)
• “Financial capability is comprised of four components:
knowledge, influences, access [to financial services], and
action” (Center for Financial Security, Univ. of Wisconsin)

6. Financial Capability
Measures
National Financial Capability Study (NFCS) Financial Literacy
Quiz: http://www.usfinancialcapability.org/quiz.php

7. Financial Capability
Measures
Financial Capability Scale (University of Wisconsin, Center
for Financial Security):
https://fyi.uwex.edu/financialcoaching/files/2013/07/FCS.pdf

8. Financial Fitness
• “Making, saving, and spending money wisely” (Family,
Career, and Community Leaders of America, FCCLA)
• “What kind of shape your finances are in” (Money
magazine): http://time.com/money/3708117/financial-fitness/
• “Working out regularly” on your personal finances like you
do for your physical health (Kiplinger magazine):
https://www.kiplinger.com/article/investing/T023-C032-S014-five-tips-
for-financial-fitness.html

9. Financial Fitness Quiz #1
https://njaes.rutgers.edu/money/assessment-tools/financial-
fitness-quiz.pdf

10. Financial Fitness Quiz #2
Virginia Society of Certified Public Accountants:
https://www.vscpa.com/Content/59148.aspx

11. Financial Health
• “The state of one’s personal financial situation”
(Investopedia): https://www.investopedia.com/terms/f/financial-health.asp
• “The dynamic relationship of one’s financial and
economic resources as they are applied to or impact
the state of physical, mental, and social well-being”
(Financial Health Institute)
• “We believe that the foundations of financial health are
built when people have day-to-day financial systems
that build long-term resilience and opportunity” (Center
for Financial Services Innovation, CFSI)

12. Components of
Financial Health (CFSI)
Source: Eight Ways to Measure Financial
Health:
https://www.metlife.com/content/dam/microsites/about/corporate-
responsibility/pdf/CFSI-
eight_ways_to_measure_financial_health.pdf

13. Financial Health Quizzes
• Clearpoint: https://www.clearpoint.org/tools/financial-health-quiz/
• Creditcards.com: https://www.creditcards.com/credit-card-
news/quiz/time-for-your-annual-financial-health-selfassessment-
test.php
• Military.com: https://www.military.com/money/personal-
finance/credit-debt-management/financial-health-quiz.html
• CFSI EMERGE Magazine: https://cfsi-emerge-
files.s3.amazonaws.com/uploads/2017/06/EMERGE-
Magazine_Quiz_AreYourFinanciallyHealthy_pg11.pdf

14. CFSI Financial Health
Research Findings
• 57% of American adults are struggling financially
(approximately 138 million people)
• Found 7 subsets of households in 3 categories:
– Healthy: Thriving, Focused, Stable
– Coping: Striving, Tenuous
– Vulnerable: Unengaged, At Risk
• The strongest predictor of being in a “Healthy”
segment was behaviors related to planning ahead
and saving

15. Financial Well-Being
CFPB Definition: Four Key Elements
Source:
https://files.consum
erfinance.gov/f/201
501_cfpb_digest_fi
nancial-well-
being.pdf

16. CFPB Online Financial
Well-Being Tool
https://www.consumerfinance.gov/consumer-tools/financial-well-being/

17. How Well Does This Statement
Describe You or Your Situation?
Options
1 I could handle a major unexpected expense Completely
2 I am securing my financial future Very well
3 Because of my money situation, I feel like I will never
have the things I want in life*
Somewhat
4 I can enjoy life because of the way I'm managing my
money
Very little
5 I am just getting by financially* Not at all
6 I am concerned that the money I have or will save
won’t last*
* Reverse coded

18. How Often Does This
Statement Apply to You?
Options
7 Giving a gift for a wedding, birthday, or other
occasion would put a strain on my finances for the
month*
Always
8 I have money left over at the end of the month Often
9 I am behind with my finances* Sometimes
10 My finances control my life Rarely
* Reverse coded Never

19. Financial Well-Being
Case Study Activity

20. CFPB Financial Well-
Being Research Findings
• Average score of 54 on a scale of 0 to 100
• Savings and financial cushions provide the greatest
differentiation between people with different levels of
financial well-being
• High levels of financial know-how and confidence have
strong, positive relationships with financial well-being
• Employment, income, education, and age (older) have
a strong relationship with financial well-being
https://s3.amazonaws.com/files.consumerfinance.gov/f/documents
/201709_cfpb_financial-well-being-in-America.pdf

21. Financial Wellness
• “Financial wellness is an intricate balance of the mental,
spiritual, and physical aspects of money. This unique
combination is an ideal to strive towards in our dealings with
money.” (DefinitionofWellness.com)
• “Financial wellness is not just about numbers—it’s about
knowing you have control over your finances in the short
term, and that you’re set up to achieve your long-term
goals, whether that means paying down debt, retiring on
your own timeline, buying a home, or taking a dream
vacation.” (PlanSponsor)
• “Financial Wellness is about your health and wealth. It’s
about the overall quality of the life you’re living.” (Jason
Vitug, founder of Phroogal/The Road to Financial Wellness)

22. FINANCIAL WELLNESS
ROADMAP
Understanding money
and banking terms;
budgeting skill;
credit knowledge
FINANCIAL
LITERACY
Abundance mindset;
research skills; using
banking products
and services.
FINANCIAL
CAPABILITY
An emergency fund; managing
credit; retirement planning; and
investment income.
FINANCIAL
SECURITY
FINANCIAL
FREEDOM
Control lifestyle inflation; holds no debt;
healthy savings accounts; passive
income streams; diversified assets and
investment portfolio.
FINANCIAL
INDEPENDENCE
Control over one's time; large
financial nest egg; income
producing assets; passive
income streams; investments.
Source: Jason
Vitug, Founder of
Phroogal

23. Financial Wellness
Check-Up
http://definitionofwellness.com/dimensions-of-wellness/financial-wellness/

24. What Do These Five
Terms Have in Common?
• They all include goal-setting and planning in
descriptions of financially successful people. Examples:
“Planning ahead for predictable life events” is a component of
financial capability
Financial health includes “staying on track to meet long-term
goals”
People with financial well-being “are setting goals important to
them and working toward those goals”

25. Other Similarities
• Financial knowledge is useful, but is only one factor
• Measure basic financial tasks (e.g., spending, saving)
• Measure feelings such as control and confidence
• Emergency savings and savings for future goals
increase scores on measurement tools
• People with higher scores on measurement tools are
more financially resilient and able to achieve goals
• Education, employment, income, and age are key
factors in achieving financial wellness

26. “The Greatest Wealth is Health”
Virgil (BC)

27. Health and Financial
Behavior Relationships:
Rutgers Research

28. Personal Health and
Finance Quiz

29. Key Points About the Quiz
• High quiz score: Respondent is frequently
performing activities that health and financial
experts recommend
• Quiz questions: “Step in the right direction”
activities; not necessarily at the highest
recommended level
– Example: Investing $3,650 annually for
retirement

30. Health Questions1 = Never
2 = Sometimes
3 = Usually
4 = Always
Daily Health Behaviors:
___ 1. I eat breakfast before starting my day (e.g., work, school, or other daily activities).
___ 2. I avoid drinking sugar-sweetened beverages (e.g., regular soda and sweetened coffee, tea, or waters).
___ 3. I eat 3 ½ to 4 ½ cups of fruits AND vegetables daily.
___ 4. I get at least 7 hours of sleep per night.
___ 5. I eat at least 1-2 high fiber foods each day (e.g., whole wheat bread and pasta, oat bran, beans, lentils)
___ 6. I eat and drink fat-free and/or low-fat dairy products.
___ 7. I avoid high-calorie salad dressings, gravies, spreads, and/or sauces.
___ 8. I eat foods that are low in fat and/or saturated fat.
___ 9. I get at least 30 minutes of aerobic and/or muscle-strengthening physical activity at least 5 days per week.
___ 10. I read the Nutrition Facts Label on food products before making a purchase
Health Score: __________
• 10-16 points- Your health choices could be better, but don’t despair. It’s never too late to take action to improve your health.
• 17-24 points- You are doing a fair job of managing your health practices and have taken some steps in the right direction.
• 25-32 points- You are doing a good job and are above average in managing your health.
• 33-40 points- You are in excellent shape managing your health. Keep up the good work!
• Note: Items that you scored with a 1 or 2 are actions that you should consider taking in the future to improve your health.

31. Finance Questions
Daily Financial Behaviors:
___ 11. I follow a hand-written or computer-generated spending plan (budget) to guide my spending and savings.
___ 12. I maintain an emergency fund equal to at least three months of basic, essential household expenses.
___ 13. I save the equivalent of at least $1 daily ($365 annually) in loose change in a savings account and/or or jar.
___ 14. I invest the equivalent of at least $10 daily ($3,650 annually) in investment accounts and/or retirement plans.
___ 15. I avoid payday loans, car title loans, pawn shop loans, cash advances, tax refund loans, and other high-cost debt.
___ 16. I owe less than 20% of my monthly net income on monthly consumer debt payments (e.g., credit cards, car loans)
___ 17. I eat at least two meals a day prepared at home instead of eating out (excluding traveling).
___ 18. I use advertisements, coupons, promo codes, sales, web sites, and/or discounts to save money on purchases.
___ 19. I live below my means (i.e., spend less than I earn).
___ 20. I make written “to do” lists or specific plans to organize my financial goals, spending, and/or daily activities.
Financial Score: __________
Score Interpretation
• 10-16 points- Your financial choices could be better, but don’t despair. It’s never too late to take action to improve your
finances.
• 17-24 points -You are doing a fair job of managing your personal finances and have taken some steps in the right direction.
• 25-32 points -You are doing a good job and are above average in managing your finances.
• 33-40 points -You are in excellent shape managing your finances. Keep up the good work!
Note: Items that you scored with a 1 or 2 are actions that you should consider taking in the future to improve
your personal finances.
TOTAL (Health + Financial) Score: __________

32. Research Papers
• O’Neill, B., Xiao, J.J., & Ensle, K. (2016a). Propensity to plan: A key to health and wealth?
Journal of Financial Planning, 29(3), 42-50. Retrieved from
https://www.onefpa.org/journal/Pages/MAR16-Propensity-to-Plan-A-Key-to-Health-and-
Wealth.aspx.
• O’Neill, B., Xiao, J.J., & Ensle, K. (2016b). Positive health and financial behaviors: The impact of
time expenditure behavior and avoidance. Journal of Personal Finance, 15(2), 41-51. Retrieved
from http://www.iarfc.org/documents/issues/Vol%2015%20Issue2.pdf
• O’Neill, B., Xiao, J.J., & Ensle, K. (2017). Positive health and financial practices: Does budgeting
make a difference? Journal of Family and Consumer Sciences, 109(2), 27-36.
• O’Neill, B., Xiao, J.J., & Ensle, K. (2017). Improving Health and Increasing Wealth: Research
Insights and Program Outreach. Journal of NEAFCS, 17, 11-23. Retrieved from
http://www.neafcs.org/assets/documents/journal/2017%20jneafcs%20final%202.pdf.
• O’Neill, B., Xiao, J.J., & Ensle, K. (2017). Reading nutrition labels: A predictor of health and
wealth? Manuscript accepted for publication by the Journal of Human Sciences and Extension
(October 2018).
• O’Neill, B., Xiao, J.J., & Ensle, K. (2018). Positive Financial Practices: Do Diet, Sleep, and
Physical Activity Make a Difference? Accepted as a poster for 2018 ACCI annual meeting and
submitted to Journal of Family and Consumer Sciences.

33. Planning Behavior Study
• Correlation analysis was conducted between the health and
financial behavior indexes. The correlation was 0.46 at a
significance level of p < .05. This suggests that desirable
health and financial behaviors are moderately associated.
• Support was found for all three hypotheses in this study:
– Respondents who reported frequent planning behavior had
higher health behavior scores than others
– Respondents who reported frequent planning behavior had
higher financial behavior scores than others
– Respondents who had higher health behavior scores also had
higher financial behavior scores

34. Budgeting Study
• Explored relationships between the practice of
following a formal budget and frequency of
performance of positive personal health and financial
practices (N =942)
• The results suggested that consumers who reported
following a budget more often scored higher in both
the health and financial practice indexes
• Budgeting and weight control both require discipline.
People who budget their money may be inclined to
budget their calories; i.e., have a daily calorie
“allowance”

35. Nutrition Label Study
• New data set (7/15-7/16); N = 3,414
• Support was found for four hypotheses:
– There are differences in demographic characteristics
between those who read Nutrition Facts labels and others
(i.e., female, older, higher education and income)
– Respondents who reported reading nutrition labels had
higher health practice scores and higher financial practice
scores than others
– Respondents who reported higher health practice scores
also had higher financial practice scores

36. Personal Health and
Finance Quiz
Research Summary
• All hypotheses to date have been supported; a 6th
study is underway exploring health index associations
with emergency funds, saving, and investing
• Results clearly show associations between health
practices and financial practices
• Personal traits such as discipline, future-mindedness
and conscientiousness may be a key factor

37. 12 Ways to Improve
Your Financial
Wellness

38. 1. Have Enough Money to
Pay Expenses
• Can income be increased?
• Can expenses be reduced or eliminated?
• Both?
• No more than 15% to 20% of net pay for
consumer debt payments
– Credit cards and student, car, and family loans
• No more than 40% to 50% of net pay for
PITI or rent and consumer debt payments

39. 2. Set Aside Money For
Emergencies
• Three to six months of expenses is recommended
but…
– Any savings is better than no savings
• Keep first 3 months very liquid (e.g., bank)
– Next 3 months liquid (e.g., T-Bill, MMMF)
– Next 6 months somewhat liquid (e.g., CDs)
– Beyond 1 year: longer-term CDs, T-notes, short term bond
funds (some volatility), line of credit

40. 3. Set Written Financial
Goals
• Provide incentive to save and “reality test” for vague
dreams
• Set a specific deadline date and cost figure
– “Save $10,000 for a new car in 5 years [year]”
• Calculate benchmark progress indicators
– “Save 2,000 per year for five years”
• Review and revise periodically

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4. Follow a Written
Spending Plan
• Income = Fixed expenses (including
savings) + Flexible expenses + 1/12 of
Occasional expenses
• “Running balance method” includes irregular
expenses (e.g., property taxes) and irregular
income and “extra” paychecks
• Start by tracking income and expenses
• Review and revise as needed

42. 5. Know Your Federal Marginal
Income Tax Bracket
• 2018 federal marginal tax rates: 10%, 12%, 22%,
24%, 32%, 35%, and 37%
• Use tax rate to calculate after-tax return:
– Tax-equivalent yield = tax-free yield divided by (100%-
marginal tax bracket)
– Example: 4% (tax-free yield) divided by (100% - 22%) or
.78 = 4/.78 = 5.13%

43. 6. Calculate Your Net Worth
• Assets: everything you own
– Liquid (cash assets)
– Investment (e.g., IRAs, stocks)
– Tangible (property)
• Debts: everything you owe
– Short-term (paid off in a year or less)
– Long-term (e.g., mortgage)
• Provides a “snapshot’ of your finances:
http://njaes.rutgers.edu/money/pdfs/networthcalcworksheet.pdf

44. 7. Save/Invest Regularly For
Long-Term Financial Goals
• Mutual fund/stock automatic investment plan (AIP)
– Example: $50 withdrawn from checking account on 15th of
month to buy shares
• Tax-deferred employer retirement plan
• Employer credit union
• Checking to savings account transfers
• Other accounts

45. 8. Increase Savings When
Salary/Earnings Increase
“Kick it up a notch” when…
– You receive a raise or bonus
– You get a higher-paying job
– When a spouse enters the workforce
– When you get a new source of income (e.g., home-based
business)
– When expenses (e.g., child care) end

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9. Establish a Personal
Retirement Savings Account
• Individual Retirement Account
– Traditional IRA
– Roth IRA
• Employer tax-deferred retirement plan
– 401(k)s- For-profit corporations
– 403(b)s- Schools and non-profit organizations
– 457 plans- State, county, and local government
– TSP- Federal government and service members
• SEPs, SIMPLEs, Keoghs for self-employment

47. 10. Diversify Your Investments
• More than one type of asset class (i.e., stocks, bonds,
cash, real estate, etc.)
• Different investments within each asset class (e.g.,
stock in different industry sectors)
• Already diversified investments
– Mutual funds
– Exchange traded funds (ETFs)

48. 11. Purchase Adequate
Insurance For Big Risks
• Purchase insurance according to “large loss principle”
• Large potential losses include:
– Liability
– Disability
– Destruction of home
– Large medical expenses
– Loss of household earners’ income

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12. Comparison Shop For
Major Purchases
• Follow “The Rule of Three”
– Check at least three competing product or service providers
– Make an “apples to apples” comparison
• Always ask “Is this the best price/fee available?”
• Inquire about available discounts
• Time purchases for better deals

50. A Financial “Physical” Is As
Important As Medical Physical
• Can assess problems
– High debt level
– Lack of disability insurance
– Lack of investment diversification
• Can evaluate progress toward goals
• Can help identify action steps
• Can provide motivation to change

51. Key Financial
Wellness Indicators
• Having money when you need it
• Living within your means
• Saving money regularly for emergencies and goals
• Investing to achieve long-term goals
• Having no debt or manageable debt
• Having adequate insurance for financial risks
• Preparing up-to-date legal documents

52. 25 Financial Check-Up Metrics
http://www.cefe.illinois.edu/JCE/archives/2013_2014_vol_30/20
13-2014_vol_30_pg13-29_ONeill.pdf

53. Final Thoughts
• Financial wellness encompasses many areas
of personal finance
– Examples: Banking, borrowing, and budgeting
• There are many action steps that people can take to
improve their financial fitness
• Pick a few action steps that work for you
• Small steps make a difference
• Get help when needed

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Comments? Questions?
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@moneytalk1
• Slides will be e-mailed along with a link to a brief
evaluation survey