Charter Financial Group

Typical signs of strong financial health include a steady flow of income, rare changes in expenses, strong returns on investments that have been made, and a cash balance that is growing and is on track to continue to grow.

Improving Your Financial Health

To improve your financial health you must first take a hard, realistic look at where you’re currently at. Calculate your net worth and figure out where you stand. This includes taking everything you own, such as retirement accounts, vehicles, and other assets and subtracting any and all debts.

Budgeting

Then you need to create a budget. With your budget, it’s not enough just to plan for where you’ll be spending, but it’s also important to take a hard and close look at where you already spend. Are there areas where you could cut back? Recurring subscriptions that you don’t really need—such as cable? It’s fortuitous to understand what your “needs” are versus what your “wants” are.

Use spreadsheets or mobile apps to help set up a budget. Or, use the time-tested envelope method, which has you create an envelope for each budget item, such as groceries, and keeping the allocated cash in the respective envelope.

One of the major keys to a budget, and maintaining your financial health, is to stick to your budget regardless of whether you start making more money or bringing in more income. Lifestyle creep, which includes spending more money as you make more money, is detrimental to your financial health.

Emergency Fund

Building an emergency fund can materially boost your financial health. The fund is meant to be money that is saved and readily available for emergencies, such as car repairs or job loss. The goal should be to have three to six months’ worth of living expenses in your energy fund.

Debt

Pay down your debt. Use either the avalanche or snowball methods. The avalanche method suggests paying as much as possible toward the highest interest debt while paying the minimum on all others. The snowball, meanwhile, suggests taking the smallest debt balance first and then work your way up to the largest debt. There are pros and cons of each; pick the one that works the best for your debt load and your money-handling preferences.

Rules and Tips for Financial Health

When it comes to effective personal finance—keeping your financial health in tip-top shape isn’t always easy. We get caught up with living life. However, here are a few quick rules and tips that you can follow to either improve or keep you in good financial health.

• Automate your bill pay and savings—that is, set up automatic transfers to a savings account and auto-pay all your bills.
• Always look for free checking and free accounts.
• Shop around for insurance, cable or and other recurring expenses. This includes if you already have these items.
• Use a budgeting method, such as 50/30/20, which says you should be spending 50% on needs, 30% on wants and saving 20% of your income. This 20% could include debt reduction if you have high-interest debts.
• Try to limit spending on housing (rent or mortgage) to not more than 40% of your income.
• Invest early and often. That is, try to put 10-15% of your income directly into a retirement account.

Business Financial Health

The financial health of businesses can be gauged by comparable factors to assess the viability of a company as a going concern. For instance, if a company has revenue coming in and cash in the bank, yet is spending its resources on new investments in production equipment, office space, new hires, and other business services, it may raise questions about the long-term financial health and survivability of the company.

If more money is spent that does not contribute to the overall stability and potential growth of the business, it can lead to a decline that makes it difficult to pay regular expenses such as utilities and employee salaries. This may force businesses to freeze or cut salaries in order to give the company the ability to continue operations.

https://www.investopedia.com/terms/f/financial-health.asp