Money Fundamentals

Financial Health: How to Assess Your Money Situation

Follow these 8 simple steps to assess your financial situation.

Just like physical health, our financial health requires regular checkups to ensure everything is in order.

What is Financial Health?

Financial health refers to your overall state of financial well-being. It encompasses various aspects of financial stability, including income, expenses, savings, debt levels, investments, and overall money practices.

Why Financial Health Matters

Good financial health typically demonstrates the ability to meet financial obligations, manage expenses, build savings, and make better financial decisions.

  • Assessing Financial Health: It provides a clear picture of your financial standing, allowing you to identify strengths and weaknesses.
  • Setting Priorities: A financial health focus helps you prioritize financial goals and allocate resources accordingly.

What is a Financial Health Assessment?

A financial health checkup is a thorough examination of your financial health. It involves assessing various aspects of your finances, including income, expenses, savings, investments, debt, and overall financial goals.

This comprehensive review provides invaluable insights into your current financial situation and helps identify areas for improvement.

How to Assess Your Financial Health

A comprehensive financial health checkup typically includes:

Step 1: Gather Your Documents

Collect all relevant financial documents, including bank statements, investment statements, tax returns, and insurance policies.

Type of Financial DocumentDescription
Income StatementsDocuments showing sources of income, including pay stubs, salary statements, investment income statements, rental income statements, and any other sources of income.
Expense RecordsRecords of monthly or annual expenses, including utility bills, rent or mortgage payments, loan payments, insurance premiums, transportation costs, groceries, entertainment expenses, and any other regular or occasional expenses.
Bank StatementsStatements from checking, savings, and investment accounts, detailing transactions, account balances, interest earned, fees incurred, and other financial activities over a specific period.
Credit Card StatementsStatements from credit card accounts, providing a summary of charges, payments, balances, interest rates, and fees associated with credit card usage during a billing cycle.
Tax ReturnsCopies of federal and state income tax returns, including W-2 forms, 1099 forms, and any other supporting documents used to prepare tax returns.
Investment StatementsStatements from brokerage accounts, retirement accounts (e.g., 401(k), IRA), mutual funds, stocks, bonds, and other investment vehicles, showing holdings, transactions, dividends, capital gains, and overall performance.
Loan DocumentsDocumentation related to outstanding loans, including mortgage loans, auto loans, student loans, personal loans, and any other forms of debt. This may include loan agreements, promissory notes, repayment schedules, and interest rates.
Insurance PoliciesCopies of insurance policies, including health insurance, life insurance, property insurance (homeowners or renters), auto insurance, disability insurance, and any other types of insurance coverage.
Estate Planning DocumentsDocuments related to estate planning, such as wills, trusts, powers of attorney, health care directives, beneficiary designations, and any other legal documents outlining your wishes regarding asset distribution and healthcare decisions.
Personal Financial StatementsComprehensive statements summarizing your overall financial position, including assets, liabilities, net worth, cash flow, and other key financial metrics. These statements provide an overview of your financial health and stability.
Budget PlansBudgeting tools, spreadsheets, or software used to track income and expenses, set financial goals, allocate funds, and monitor spending habits. Budget plans help you manage finances effectively and make informed decisions about money management.
Retirement Account StatementsStatements from retirement accounts, such as 401(k), IRA, or pension accounts, showing contributions, investment performance, account balances, and any distributions or withdrawals made during a reporting period.

Step 2: Income Analysis

Evaluate your sources of income, including salaries, bonuses, dividends, and other earnings.

  • Primary Income: This includes your salary or wages from employment. Calculate your net monthly income after taxes and deductions.
  • Secondary Income: Consider any additional sources of income such as bonuses, freelance work, rental income, or dividends from investments.
  • Irregular Income: If you have irregular income, such as selling unused stuff or other side hustles. Estimate an average monthly amount based on past earnings.

Assessment: Evaluate the stability and reliability of your income sources. Are there any potential risks or fluctuations?

Ensure your income covers essential expenses and leaves room for savings and investments.

SalaryMonthly income from primary job4,000
Freelance EarningsIncome from freelance graphic design work500
Rental IncomeMonthly rent from investment property1,200
DividendsQuarterly dividends from stock portfolio150
Interest IncomeMonthly interest from savings account50
Side Hustle IncomeIncome from driving for a ride-sharing app300
Total Monthly Income6,200

Learn more about listing your income and different income sources.

Step 3: Expense Tracking

Understand where your money is going and identify areas for improvement. Review your monthly expenses and categorize them into essential and discretionary.

  • Essential expenses include housing, utilities, groceries, transportation, and healthcare.
  • Discretionary expenses include dining out, entertainment, vacations, and luxury purchases.

Look for opportunities to reduce unnecessary spending and increase savings.

EssentialsHousing (rent or mortgage)$1,500
Utilities (electricity, water, gas)$200
Transportation (car payment, gas, public transit)$300
Debt PaymentsStudent Loan$200
Credit Card Payments$150
Personal Loan$100
Discretionary SpendingDining Out$250
Entertainment (movies, concerts)$100
Shopping (clothing, accessories)$150
Subscriptions (streaming services, magazines)$50
Savings and InvestmentsRetirement Account Contribution$300
Emergency Fund Savings$200
Investment Portfolio$100
Total Expenses:$3,800

Find the best expense tracking apps on

Step 4: Savings Assessment

Examine your savings accounts, emergency fund, and retirement accounts.

  • Evaluate your savings accounts’ balances and interest rates, including checking, savings, and money market accounts.
  • Review contributions to your retirement accounts such as 401(k), IRA, or pension plans.

Determine if you’re saving enough to meet short-term and long-term financial goals, such as buying a home, funding education, or retiring comfortably.

Emergency Fund$500
Retirement Savings$800
Education Fund$200
Vacation Fund$100
Home Down Payment$300
Investment Portfolio$600
Total Monthly Allocation$2,500

Learn more about setting up multiple savings accounts.

Step 5: Debt Evaluation

First, List your outstanding debts.

  • List debts, including credit cards, student loans, car loans, and mortgages.
  • Note each debt’s outstanding balances, interest rates, and minimum monthly payments.

Here’s an example of how you might organize the information for each debt.

Type of DebtOutstanding Balance ($)Interest Rate (%)Minimum Monthly Payment ($)
Credit Card$5,00018.99$200
Student Loan$20,0004.5$300
Car Loan$15,0006.25$350
Personal Loan$10,0008.75$200

Then, calculate your debt-to-income ratio and develop a plan to pay off high-interest debt efficiently.

It’s calculated by dividing your monthly debt payments by your gross income. The DTI ratio is expressed as a percentage.

DTI Ratio = Monthly Debt Payments / Monthly Gross Income

Monthly Debt PaymentsDivided ByMonthy Gross IncomeEqualsDTI Ratio

You can convert the decimal value into a percentage: DTI Percentage = 0.17 x 100 = 17%

Learn more about debt pay-off strategies.

Step 6: Investment Review

Assess your investment portfolio’s performance and ensure it aligns with your risk tolerance and financial objectives. Consider rebalancing your portfolio periodically to optimize returns and minimize risk.

Financial ObjectivesIdentify your other goals, such as saving for a home purchase, funding education expenses, or retiring early. Evaluate whether your investment portfolio supports these objectives.
Performance AnalysisAssess whether your investments meet performance expectations. Make adjustments as necessary to optimize portfolio performance.
ContributionsDetermine if you can increase the amount you invest to accelerate reaching your goals.

Get a better understanding of investment planning.

Step 7: Insurance Coverage

Review your insurance policies, including health, life, home, and auto insurance. Ensure you have adequate coverage to protect against unforeseen events and mitigate financial risk.

Assessing Insurance NeedsConsider health, life, property, disability, liability, and long-term care insurance to protect against risks and uncertainties.
Review Existing PoliciesReview your existing insurance policies thoroughly to ensure they provide adequate coverage amounts and types. Consider adjusting coverage limits or deductibles to better suit your needs and preferences.

Learn more about insurance planning to reduce risk.

Step 8: Review Your Financial Goals

Determine if you’re on track to reaching your life milestones based on the financial goals you’ve set.

Verify that each goal is SMART (Specific, Measurable, Achievable, Relevant, Time-bound).

Emergency Fund SavingsSave $5,000 in an emergency fundYesYesYesYesYes
Debt RepaymentPay off $10,000 in credit card debtYesYesYesYesYes
Retirement SavingsContribute $500 monthly to retirement accountYesYesYesYesYes
Home Down PaymentSave $40,000 for a down payment on a houseYesYesYesYesYes

Financial Health Assessment Tips

  • Schedule Regular Checkups: Make financial health checkups a recurring event on your calendar, whether monthly, quarterly, or annually.
  • Be Honest and Thorough: Don’t shy away from confronting financial challenges. Be honest about your financial situation and address areas that need improvement.
  • Seek Professional Advice: Consult a financial planner for personalized guidance and recommendations tailored to your needs and goals.
  • Celebrate Progress: Celebrate achievements and milestones along the way to keep yourself motivated.


By conducting regular financial health assessments, you can clarify your financial situation and make better decisions to support your overall well-being.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of and His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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