Your personal and mental health are extremely important. Right below those two, we’d have your financial health. It matters a lot. How do you know if you’re financially healthy? Here’s a checklist.
Start with Credit Score
Start your quick checkup with your credit score. The higher your credit score, the healthier your finances are. This indicates to lenders that you can handle debts and are creditworthy. The better your score, the better deals and rates you may qualify for.
Retirement Savings
Use a retirement calculator to make sure you are healthy in this category. Remember, even if you can’t save a lot, every little bit helps. You can’t depend solely on Social Security alone during retirement.
Debt-to-Income
Almost everyone has some form of debt, from what is considered good debt (mortgage) to bad debt (credit cards).
- What is DTI? The thing to watch for your financial health is your debt-to-income ratio. This refers to the percentage of your monthly income that is spent on paying debts.
- How is DTI Calculated? All you have to do to find your ratio is divide your monthly debt payments by your gross monthly income. You want your ratio to be 35 percent or less.
Short Term Savings
If you want to be financially healthy, you must have a short-term savings and/or emergency fund. Ideally, you want to have saved enough to cover six months of fixed expenses.
Do One Thing: Use a retirement calculator to make sure you are on target (or as close as possible) to socking away plenty of cash for your golden years.