Learn how and how often to check your financial health
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Your control over your finances defines your financial health, the means to work toward your financial goals, your ability to handle a financial surprise, and the freedom to enjoy your life.
To measure the state of your financial life, you can ask yourself several key questions each year.
Key Takeaways
- Financial health or fitness is, in part, a measure of your ability to meet your financial obligations.
- Your financial health is also your ability to secure your financial future and to fund choices that allow you to enjoy life.
- Conducting an assessment at least yearly can help you stay on top of your financial well-being.
- Setting a budget, reducing debt, and saving for emergencies and retirement can improve your financial health.
What Is Financial Health?
The Consumer Financial Protection Bureau (CFPB) breaks financial health down into four elements:
- Your control over your current finances
- Your ability to handle an unexpected expense
- Your freedom to make financial choices that allow you to enjoy life
- Your progress on your financial goals for the future
What Should Be Part of a Financial Health Check-Up?
When conducting a thorough financial check-up, you can:
- Assess your financial goals
- Evaluate your budget
- Check on your emergency fund, retirement savings, and any other investments
- Review your debt levels
- Check your credit score and credit report
- Review your insurance coverage and taxes
- Establish and update your estate plan
How Frequently Should Financial Health Check-Ups Occur?
For many people, an annual financial check-up is a good place to start. The first of the year is a good time to review your finances and make plans for the year ahead. It can also be helpful to assess how major life events, such as a new job, a home purchase, marriage, divorce, the birth of a child, or a death in the family, impact your financial health.
How Can Consumers Improve Their Financial Health?
Over the past year, financial well-being in the United States has declined. In 2023, 38% of families reported difficulty paying bills, which jumped to 43% in 2024, according to the CFPB.
While many people are grappling with financial challenges exacerbated by inflation’s effects, several steps can still be taken to improve their financial health.
- Budgeting: Create a budget to manage your discretionary and non-discretionary spending. Can you cut back on unnecessary spending like subscriptions and streaming services? Whatever your income level, living below your means is essential to establishing financial resilience.
- Debt management: How much debt do you have? What steps can you take to reduce it?
- Saving: Do you have an emergency fund and long-term savings? Can you automate savings contributions to help you stay on track?
- Investing: Are you investing money in retirement accounts, such as an IRA or 401(k)? Are you taking advantage of employer-matching contributions?
The Bottom Line
Strong financial health typically means you have a steady flow of income, solid savings, and the ability to spend money on the things and experiences that make you happy. Regularly checking in on your finances ensures you have a clear picture of your financial health. If you are concerned about your financial well-being, turn to the several ways you can build a stronger path to your financial future.