5 Tips to Assess Your Financial Health

Financial health is just as important as your physical well-being, and yet many people avoid confronting their money problems until it’s far too late. Understanding your financial health enables you to take proactive measures before minor issues escalate into major problems.

In the business and finance world, thought leaders like Alex Kleyner have emphasized the importance of understanding and addressing financial challenges early, particularly when it comes to issues such as medical debt, which can quietly erode financial stability over time.

Whether you’re in the midst of managing a household, running a small business, or even simply trying to get a clearer picture of your finances, let’s take a look at five tips to help you assess and take control of your financial issues.

Understanding Your Financial Health

1. Start by taking an inventory. The very first step in solving any problem is to understand it. Start by creating a detailed list of your income, expenses, debts, and assets. Many people are surprised to learn just how much they spend or how little they save. Once everything is laid out in black and white, this looks different. The inventory should include all monthly income, fixed expenses, variables, debt, and assets. Ignoring hidden debts, such as unpaid medical bills, can compound long-term financial stress.
   
2. Analyze your spending. Once you have a clearer picture of your finances, it’s time to take a closer look at how you’re spending your money. Look for patterns that could be draining your resources without adding much value to your life. Subscriptions you no longer use, impulse purchases, and dining out frequently can all add up. Use budgeting tools or apps to categorise your spending and identify areas where you can cut back. Being aware of your habits is the first step in changing them.
   
3. Make a list of your debts. Before you can know which debt to prioritise, you need to know what they are. Debt is one of the most significant sources of financial strain, and not all debts are created equal. Create a list of your debts, sorting them by interest rate, total balance, and urgency. High-interest debts, such as credit cards, should be addressed first, while other obligations, like medical debt, should be dealt with proactively. Consider consolidation options or negotiate a payment plan if necessary. The goal is to prevent debt from snowballing while preserving your credit.
   
4. Set some goals. Financial goals can give you a sense of direction. These may include paying off a credit card within six months, building an emergency fund, or saving for a large purchase or investment. Be realistic and specific with your goals and break them into actionable steps. Having a plan makes it easier to stay disciplined and motivated, especially during times of financial stress.
   
5. Seek professional help. If your financial issues are overwhelming, don’t hesitate to consult a financial advisor or a credit counsellor. Professionals can offer you tailored advice, help you to set your priorities, and ensure that you’re making informed decisions. In particular, if you’re facing large amounts of medical debt, you need to make sure that you’re understanding your rights and options before it affects your credit score.