We tend to think that being good with money and being financially healthy is clear-cut. But, as it is with most things, it’s more complicated than just a number in your savings or a certain credit score. Here we discuss four key factors that determine your financial health.

 

1. Monitor your expenses

We always recommend following a spending plan that you can adjust as your needs change, but even if you don’t follow a strict spending plan looking at your transactions every month is a good habit to get into. Checking up on things via online banking, the mobile app or looking at your monthly statements will help you notice fraudulent purchases, mistakes or surprise expenses.

In general, it's a good idea to consider how much you spend on the big categories like housing expenses, debt expenses and living expenses. Consider also taking into account how much you’re saving each month and if the rate at which you’re saving corresponds to your goals.

 

2. Make financial goals

Being good with money doesn’t mean reaching the same financial goals as everyone else. What is important is that you set goals, especially savings goals, and you’re working a plan to reach those goals.

Maybe you want to own a home, buy a car, travel a couple times a year or retire early. Whatever your goals, figure out how your finances can help you achieve them.
 

3. Have good credit habits

Establishing good credit habits is about the progress we make towards making payments on time, borrowing enough (but not too much), paying more than the minimum payment, maintaining old accounts and making sure you’re monitoring your credit for fraud or errors. All of these will lead you to a good credit score.

A credit score does not take your savings or investment success into account, but it does show if you’re good at borrowing money and paying it back. So, even if you don’t plan to take out a loan there are other companies that take your credit score into account like utility and cell phone providers, insurance companies and landlords.
 

4. Know your net worth

Did you know net worth is your total assets minus your liabilities? Assets include the money in your bank accounts, investment accounts, home equity and more. Liabilities include what you owe like your credit card balance, auto loans, student loans, mortgage balance and more. Add each up separately and subtract the liabilities from the assets.

Don't be surprised if your net worth is negative. This means you owe more money than you currently have and this is common when you’re starting out or starting over. But as you get older, your net worth should increase as you pay down debt and start investing consistently. It is good practice to track your net worth a couple times a year.
 

Need support? We're here for you.

Our Financial Health Centers specialize in helping people build and maintain financial slack. We’re here to support you in getting your financial health factors where they need to be to work for you.