The document provides 12 tips for improving financial wellness. The tips include having enough money to pay expenses, setting aside money for emergencies, setting written financial goals, following a written spending plan, knowing your tax bracket, calculating your net worth, saving regularly for long-term goals, increasing savings when income increases, establishing a personal retirement account, diversifying investments, purchasing adequate insurance, and comparison shopping for major purchases. Financial wellness encompasses many areas of personal finance and taking small steps can help improve financial fitness.

1. Financial Wellness:
Twelve Timeless Tips
Barbara O’Neill, Ph.D., CFP®
Rutgers Cooperative Extension
boneill@njaes.rutgers.edu
@moneytalk1

2. Wellness Wheel Activity

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

4. 12 Ways to Improve
Your Financial
Wellness

5. 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

6. 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

7. 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

9. 5. Know Your Federal Marginal
Income Tax Bracket
• 2019 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%

10. 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

11. 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

12. 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

14. 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)

15. 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

17. 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

18. 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

19. 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

20. My First Post-Rutgers
Project

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