Being financially healthy is about having control over your finances, being able to absorb a financial setback, being on track to meet your financial goals and having the financial freedom to make choices that allow you to enjoy life. Financial health assesses whether people are spending, saving, borrowing and planning in a way that will enable them to be resilient and pursue opportunities over time.

How do you get there? The following eight behaviours help to maintain strong financial health:  

Spending

1. You spend less than you earn. Spending less than you earn is one of the most important financial concepts to understand and follow. It can be difficult and may take some initial life changes, but like with any habit, the longer you do it, the easier it becomes. 

2. You pay bills on time and in full. The extent to which you are keeping up with your bill payments sheds light on how well you can manage your cash flow and day-to-day financial commitments. Missing payments cost you more money with interest charges and may hurt your credit score.

Saving

3. You have a sufficient emergency fund. Having an emergency fund is important for coping with an unexpected expense, such as a car repair or a sudden drop in income. Many experts generally encourage saving 3-6 months of living expenses but the actual amount may be unique to everyone. To learn more about how much you should save, check out CUA’s article on Planning for Life’s Surprises. 

4. You are on track with retirement savings. Retirement planning is a lifelong process. You can start at any time, but the sooner you start the better. Having long-term savings is necessary to achieve financial security and to take advantage of opportunities such as investing in a home or a child’s education.

Borrowing

5. Your debt load is sustainable. Staying on top of your debt and having a manageable debt load allows you to not be consumed by late fees or over-borrow, which may lead to further financial difficulties, including bankruptcy. 

6. You have a good credit score. Although a credit score is not the sole indicator of overall financial health, it can impact an individual’s ability to access credit, including at a lower cost. For tips on how to improve your credit score, read CUA’s article on Ways to Build Your Credit.

Planning

7. You are adequately insured. Having appropriate insurance protects you against financial shocks that could eliminate your savings and allows you to be resilient in the face of unexpected expenses, such as the death of a loved one or a medical emergency. 

8. Plan ahead for expenses. Budgeting is the cornerstone of financial planning, including looking at your expenses and making a plan that will leave you with money at the end of the month. To maintain financial health, it is crucial to continue future planning behaviors, such as using a budget and setting up automatic funds transfers.

It is said that what gets measured, gets managed. Find out how you score and what actions you should consider next to improve your financial health by accessing CUA’s Financial Health Index, which is an eight-question quiz to arrive at a financial health score. The goal is not to achieve a perfect score, but rather to determine a starting point to talk to a Financial Advisor about what optimal financial health looks like for you. Have questions about your financial health? A member of the CUA team would be happy to help, contact us at info@cua.com or by calling 902.492.6500.