Sense & Centsibility Blog
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Top ten signs of financial health [rate yourself]

There are a lot of words and phrases out there to describe financial health, such as financial literacy or financial wellness. But what does it really mean to be financially well or healthy?

Here are 10 factors to consider.

1) Spending less than you earn

This is the most important factor. You absolutely must spend less than you earn to be financially well, or you run the risk of going into (or going further into) debt. 

2) Knowledge of your finances

This doesn’t mean you have to use a spreadsheet to track your spending constantly or spend the exact same amount of money each month. Not only is that not fun, but it can also be time-consuming and, for most of us, almost impossible with everything we have going on. But in general, a telltale sign of financial health is knowing what you earn, how much you spend each month, and how much you owe.

3) Paying down and controlling debt

Being completely debt-free for the average person is almost impossible, especially if you are a homeowner or had postsecondary education. What is crucial, however, is that your debt is under control. This means you can afford the payments and even make more than the minimum payment so you can pay off debt faster and spend less on interest.

4) Covering periodic expenses

Periodic expenses are things like your vehicle tabs, annual veterinary visits, etc. that might come up quarterly, semi-annually or annually. If you don’t have to scramble or charge them when these costs occur, you are doing great. Some folks even create a separate savings account and have that money set aside just for periodic expenses. Think about whether this would be helpful for you. 

5) Saving for emergencies/preparations for income loss

With uncertainty in life being the only thing that’s certain, saving is an absolute necessity. I wish it was as simple as just having a little cash in savings. But most of us aren’t in zero danger of losing our jobs due to downsizing, and, as humans, we get sick and/or injured. Therefore, not only should we be prepared for a small emergency, but our goal should also be to have at least six months’ worth of expenses in savings in case something major affects our income. This may seem daunting, but just start, and keep contributing whenever you can.

6) Retirement savings

In order to retire, we have to have income from somewhere, especially because the future of Social Security is uncertain. Therefore, be sure to take advantage of any employer-sponsored retirement plans and matches. Also, determine what you need to save based on when you want to retire. AARP has a great retirement calculator to help with this. If you haven’t started saving or just want more info, check out “Live your best life before and after retirement” and this NerdWallet guide to retirement investments.  

7) Good credit

It’s important to have good credit and a higher credit score for a lot of reasons. Credit affects your ability to take out loans and how high or low your interest rate will be — not to mention, credit impacts our insurance rates and more. With that said, good credit isn’t always a sign of financial health, because you can have a lot of debt and still have a high credit score. BUT if you have a good credit score and the other nine factors on this list apply to you, then your credit is definitely a sign of financial health.

8) Making smart financial decisions

Do you avoid making impulse purchases, or do you save up for larger purchases such as a trip or new furniture? Thinking through what you’re spending your money on and prioritizing your spending is key. That, plus avoiding charging large purchases (unless you have the cash to pay it off right away) shows true financial intelligence. 

9) Stress level about finances

This one is pretty simple. When you’re financially healthy, you aren’t constantly worrying about money or how you’re going to pay bills. 

10) Ability to spend money on fun stuff

Can you afford to buy something for yourself, get a massage or go to a movie with friends AND it fits in your budget? If so, that is wonderful! And it’s a sign that your finances are in great shape. 

If you checked off all 10 of the above, congratulations; you are financially healthy! If you didn’t, THAT’S OKAY, TOO. Money and finances are complicated, and life happens. And that’s why LSS Financial Counseling is here. Our trusted, nonjudgmental financial counselors provide support so you can improve your finances and reach your financial goals, especially if credit card debt is holding you back. Learn more about the services we offer.

Give us a call today at 888.577.2227 or email us to schedule your free, confidential financial counseling session. Ready to dive in? Then, create your own financial profile to begin your online session. 


Author Elaina Johannessen is program director for debt management plan operations with LSS Financial Counseling.