Your financial health checklist: Are you in control?

04 November 2024

Just like your physical and mental health, your financial health requires regular checkups and close attention. But what does it mean to be financially healthy? And what are the signs that you are on the right track?

In this blog, we provide a checklist of the key indicators of financial health and offer advice on how to move forward if you are feeling concerned.

Your income is consistent and reliable

It can be difficult to budget and manage your money if your income is unstable. Having regular earnings coming into your bank and a plan for how that money will be spent is essential for staying on top of your finances.

Not every career provides the luxury of a regular income, but if your income fluctuates, it is still important to manage this by creating a flexible budget and setting aside more money during the times you are earning more.

You have low levels of debt

Being financially healthy does not mean you have to be debt free. It can actually be a good thing to have some manageable debt as this can help to build your credit score and achieve your long-term goals. But your level of debt should be sustainable and should not be causing you to feel stressed.

If you can meet your repayments easily, and if even better, you are paying off more than your minimum payments each month, then you are likely in a good position.

Debt becomes a problem when you are relying on forms of credit or loans to pay for your everyday living expenses, or if you are struggling to meet your minimum payments. In this situation, you should consider seeking financial advice to explore what options may be available for resolving this issue.

You pay your bills on time

Paying the money that you owe, including your mortgage or rent, bills, loan payments or credit card repayments, on time is a key sign of financial health. By making these payments on time, you will keep your credit score healthy and avoid incurring penalties for late payments.

If you are struggling to pay any of your bills on time, it may be a sign of a deeper financial issue. It is important to address this issue early by regularly reviewing what money is coming in, what money is going out and budgeting accordingly. If this worry has gone beyond the point of budgeting, it is likely time to seek professional advice.

You have an emergency fund of savings

Life is unpredictable, and situations like job loss, illness or sudden economic downturn can affect anyone at any time. A strong indicator of financial health is having some savings set aside in case of emergencies such as these.

Most money experts recommend having at least three months’ worth of your salary saved for a rainy day, but even if your savings pot is small to begin with, building it up should be a priority. This safety net will help to prevent you from turning to credit or loan options in an emergency.

You have a healthy credit score

Your credit score reflects your ability to manage debt responsibly and can affect the way you borrow money. There are three main credit rating agencies in the UK: Experian, Equifax and TransUnion. Your credit score may vary slightly from agency to agency, but it should always be rated as fair, if not good or excellent.

A financially healthy person is also someone who checks their score regularly. If something on your credit report does not look right, you can flag it with the agency which may help to improve your score once the issue has been resolved.

You feel confident and in control of your finances

Finally, one of the clearest signs of financial health is how you feel about your finances. Do you know how much you earn, what your monthly expenses are, and how much debt you have, if any? Are you prepared for the future with a financial plan? If you can answer yes to these questions, you likely have a clear picture of your finances and are in control.

However, if you are feeling stressed, lacking confidence or avoiding your finances all together, it may be a sign that things are slipping out of control. Financial stress can affect both your mental and physical health, so it is crucial to take action if you are feeling overwhelmed.

If you have gone through this checklist and noticed areas where you are struggling, it might be time to seek financial advice. For more information on the options available to you and where to go for advice, download our free guide, and for more information on how to prepare for seeking advice, we recommend National Debtline’s guide, 'Getting ready for advice'.