You probably pay close attention to your physical health and understand that eating better and exercising more are key to living a healthier life.
But there is often less discussion about how to improve your financial health and the steps that can help you stay on track. Everyone’s situation is different, but there are several strategies you can follow to help improve your overall financial position and gain better control of your money. Here's what to know.
What Is Financial Health?
There is no official definition of “financial health,” but the term is often used to describe the overall condition of a person’s finances. Strong financial health generally means you can cover your current needs while also working toward short- and long-term goals. These goals may include buying a home, saving for college or retirement, or covering expenses later in life.
There is also no single way to measure financial health. However, the Consumer Financial Protection Bureau (CFPB) offers a Financial Well-Being Scale to help people evaluate their situation.1 The CFPB actually defines financial well-being as "a state wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life."
The assessment includes questions such as:
- Could you handle a major unexpected expense?
- Do you feel like your money will last?
- Are you just getting by?
- Can you enjoy life based on how you manage your money?
Your answers can provide insight into your overall financial health and highlight areas that may need attention.
4 Considerations Around How to Improve Financial Health
It is possible to assess and strengthen your financial health. If you want a clearer view of your current situation and how to improve it, these four considerations can help guide your approach.
1. Know Where You Are
Start by understanding your current financial position. This includes:
- How much you spend each month
- What debts you owe and their interest rates
- How much you have saved for retirement
Reviewing this regularly can give you a more complete picture of your finances. It also helps you identify areas that may need attention.
2. Create a Budget & Debt Repayment Plan
Once you know where your money is going, you can build a plan to use it more effectively. A budget is a key part of managing your finances.
List all your expenses, including:
- Fixed expenses like rent and insurance
- Variable expenses like utilities
- Discretionary spending like dining out, clothing, and subscriptions
While fixed costs are harder to change, you can set limits on discretionary spending. You may also spot areas where you can cut back.
As part of your budget, include a plan to pay down debt. You can choose to focus on the highest interest rate first or pay off the smallest balances first. Set a clear timeline for repayment. For example, paying off a $2,000 credit card balance in 10 months would require $200 per month.
You may need to reduce spending or look for ways to increase income, such as taking on part-time work or asking for a raise. A budget gives you structure and direction, helping you take action and stay on track.
3. Set Long-Term Financial Goals
Improving financial health also involves setting and working toward long-term goals. While paying down debt, consider how to build an emergency fund or save for retirement.
It may not be possible to do everything at once, but building the habit of saving is important. Even small, consistent contributions can add up over time. An emergency fund can help cover unexpected expenses and prevent additional debt. Research shows that many Americans would struggle to cover a $1,000 emergency expense. Building savings can provide a buffer when unplanned costs arise.2
Saving for retirement is also important. Even modest monthly contributions, such as $50 or $100, can grow over time through compounding. Starting earlier allows more time for savings to build.
4. Work to Stay Financially Healthy
Financial health can change over time. There may be periods when you feel on track and others when adjustments are needed.
The key is to stay aware of your financial situation and continue refining your approach. You can choose to manage this on your own or seek guidance from a financial professional if you want additional support.
The Bottom Line
As long as you take steps to become more engaged in your finances, you can gain a better understanding of your money, where it goes and how best to use it to achieve your short-term and long-term goals. Ultimately, that's the key to achieving better financial health.
Sources
- Find out your financial well-being. https://www.consumerfinance.gov/consumer-tools/financial-well-being/.
- Bankrate’s 2026 Annual Emergency Savings Report. https://www.bankrate.com/banking/savings/emergency-savings-report/.
