What are the signs of good (and poor) financial health?

2022-10-05  4 minute read

Joey Zanni

Lifestyle Debt

Currently, household debt levels, inflation, and key interest rates in Canada are among the highest in the world. Personal finances have become a hot topic as individuals and families cope with the effects of an economic downturn.

couple making the family budget together on a computer

Maintaining good personal financial health is more crucial than ever. How you do so will be determined by factors, including your age, employment status, income levels, family size, and where you live.

You can start by asking yourself pertinent questions to determine the state of your financial health and identify areas that need to be improved on.

Here are some key questions to start with:

Do you know where your money goes?

Maintaining a weekly or monthly budget means you’re able to account for how much money comes into your account and how it leaves. This seemingly simple yet effective process is one of the habits of financially healthy people.

Creating and maintaining a budget will show you how much it takes to fulfil life’s necessities, and where you may be allocating more funds than you should (subscriptions, dining out, entertainment, smoking etc.)

The activity provides an opportunity to make lifestyle changes, cut down on needless expenses, save, invest, and set financial goals for the future.

Do you carry credit card balances?

Credit cards are a widely accepted form of payment that give users the flexibility to buy now and pay later, establish a credit score, among other monetary perks. This flexibility can come with temptations to carry balances on your credit card, incur interest charges and fall into debt.

However, your awareness of this temptation and diligence with paying off your balance at the due date makes you financially healthy. If you carry a balance forward every month, you may run into issues that will need to be addressed through a review of your budget or a conversation with a Licensed Insolvency Trustee.

 Can you cover your basic expenses?

You’re financially healthy if you can cover your basic expenses such as housing, utilities, groceries, and transportation without running into debt. In line with the previous questions asked, your ability to budget and pay off your credit card balances in due time will leave you with sufficient funds to cover your basic expenses. 

Do you have emergency funds?

An important indicator of good financial health is your ability to plan for unforeseen expenses. It is important to have a stash of money set aside to cover the financial surprises life may throw at you. Planning for emergencies like car troubles, unexpected travel, job loss, medical crisis will prevent you from dipping into your credit account when they arise.

You’re on the right path if you include your emergency funds in your budget.

Do you have retirement savings?

Statistics show that less than 40 percent of Canadians have access to a registered pension plan through their employer. If you’re in the category of people who do not have a pension plan, you should start to think of your retirement savings.

No one wants to work forever. When you reach retirement age, life will be more comfortable if you have a nest egg to rely on.

Do you monitor your credit?

You’re in good financial health if you’re aware of your credit activity, check regularly for errors and correct issues that may arise. You can do these things without obsessing over your credit score.

Credit report issues could negatively impact your ability to borrow for major lifetime purchases like housing and vehicles, so it’s normal to keep an eye on your credit activity.

Are there tools to help?

If your answer to most or all these questions are no, you do not have to panic. Our website has a range of tools to help you assess your financial health and manage your finances. The MNP Debt Scale will assist in understanding how debt is impacting your financial health.

The tool is quick, easy to use, and completely confidential. It can help determine where you’re struggling and what you can do to improve your situation.

If the Debt Scale confirms you may be struggling our Licensed Insolvency Trustees are always available for a Free Confidential Consultation. Together we’ll review your entire financial situation and discuss all the available options to help you begin moving in the right direction.

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