In 1999, I was diagnosed with breast cancer. After 10 months of treatment,
my doctor described my physical health
status as NED, which is doctor-speak for No
Evidence of Disease. The same acronym can be applied to financial health: No Evidence of Distress. Financially healthy people with financial
well-being are comfortable in the present (e.g., paying bills and freedom to make
choices) and on track for a secure future (e.g., resilience to absorb “ shocks” and savings for
retirement and other goals).
Financial health gives people options, opportunity, and the capacity to
bounce back from life’s inevitable challenges. Like unemployment or disability
or a car breakdown…or breast cancer.
Unlike physical health challenges, I’ve been fortunate to have good
financial health throughout my adult life. By most metrics, I am doing very
well. I count my blessings because 57% of Americans
struggle financially and 43% have trouble paying bills and credit payments
according research by the Center for
Financial Services Innovation.
I’ve had several key advantages to build my financial health including
higher education, health insurance, and steady employment. I’ve also worked
hard (i.e., “leaned in”) and made frugal
spending choices. I was the only person in my immediate family to earn a
bachelor’s degree. My American Dream Score is 63. This means
“the majority of factors [but not every factor] have been in my favor.”
How can Americans build financial health? 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. One of my favorite action
strategies is completing a savings challenge. I’ve personally created five challenges, from $100 a month
to $2,500 a year, and done them all. Challenges give you a template to follow
and progress points to celebrate along the way.
Other things that build financial health:
Planning- Studies 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 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 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.
I count my blessings that I am financially healthy and hope to remain so.
Nothing is guaranteeed, however. The Poverty Risk Calculator says I have a 25%
chance of being poor during my lifetime. Just being a woman is apparently a
risk factor.
My passion is helping others achieve financial health through my writing
and teaching. My greatest hope is that the financial health status of every
American will become NED.
