The current state of your personal finances is a reflection of your financial health. There are several factors to consider when deciding if you’re financially healthy or weak.

Your income exceeds your expenses 💰

This is the most obvious factor. If you have sufficient money to comfortably survive on every month and you’re not living from paycheck to paycheck, it’s safe to say that you’re financially healthy… relatively.

The unfortunate truth is that most people find themselves scrambling at the end of the month to make ends meet. When there’s too much month at the end of the money and you’re in a constant state of financial anxiety, you’re NOT financially healthy.

Do you have a 3-6 month emergency fund? 🏥

Having enough money saved up to cover 3 to 6 months’ worth of expenses is a sign of financial health. It’ll not only give you peace of mind, but you’ll not feel desperate. This is priceless.

Often people on a very tight budget are stressed out. Just having extra money in the bank to cover unforeseen expenses will help to give them peace of mind. Being financially healthy also has an impact on your physical health. As witnessed with the recent pandemic, a financial reserve, or the lack of it, had a huge impact on the lives of so many people, physically and mentally.

You can pay your bills on time 📨

Someone who is financially healthy has no problem settling their credit card bills, paying the utility bills and so on. They’re not late on payments and don’t incur late charges or accrue unnecessary interest on outstanding balances.

Those who are not financially healthy are often paying the minimum on the credit card bills, if they even pay it at all. Their debts keep snowballing and the creditors come calling. This is definitely not a good situation to be in.

Take a look at how much bad debt you have. This is often the money you owe on your credit card bills, line of credit, etc. Add it all up until you get a number.

If your debt total is more than 25% of your total credit limit (on all your credit cards), you’re in too much debt. Aim to reduce your debt as fast as you can to restore your financial health.

Health insurance 🧾

If you have sufficient health insurance, that’s a good sign of financial health. Should you encounter a situation where you have hefty medical bills, your health insurance will help to cover most of your bills.

Are you relying on others for financial assistance? 🙋

If you’re relying on the government for welfare checks or you’re living in your parent’s basement when you’re 35 (because you can’t afford to rent or buy a house), you’re NOT financially healthy.

Being independent and standing on your own two feet financially without relying on handouts is one of the cornerstones of good financial health.

Is 10%-15% of your income going to a retirement account? 🧓🏽

If you’re squirreling away a percentage of your income for retirement, that’s excellent. You have foresight and your financial health is good and will get better.

Despite inflation, devaluing the currency, being able to save for retirement is a sign that your income exceeds your expenses and you’re in good financial health.

You know your credit score 👍🏾

If you live in the US, you’re entitled to one free credit report a year. Get yours and look at your score. This is also known as your FICO score.

If your score is in the range of:

  • 300 – 629 (Bad)
  • 630 – 689 (Fair)
  • 690 – 719 (Good)
  • 720 – 850 (Excellent)

Your goal should be to get your credit score up to the 720-850 range. This is an undeniable sign of good financial health.

Ultimately, your financial health will be determined by how much you earn, your spending habits, how fiscally responsible you are and your eagerness to remedy your financial situation, if it’s less than favorable.

Almost anyone with poor financial health can get better if they proactively take measures to remedy their situation and give it time. So even if you’re mired in debt, take heart. You can still become financially healthy…and wealthy!