You might be seeing a doctor annually, but are you checking in on your financial health every year, too? While it's easy to ignore the symptoms of ailing finances, they're fairly obvious to spot -- and not terribly difficult to remedy if you can address them quickly.

Learning how to assess your financial health today greatly improves your ability to meet financial goals tomorrow. The idea is to benchmark where you stand now so you can set savings and debt pay-down goals for the future. Then, design and follow a household budget to reach those goals. In a year, you can reassess and rejoice in your progress. Easy, right?

Let's dive into the finer details of your financial health assessment. This framework is adapted from the 2019 U.S. Financial Health Pulse Trends Report, a product of a research initiative designed to understand how financial health in America is changing over time. Researchers defined and surveyed respondents on eight financial health indicators to get a comprehensive picture of household spending, saving, borrowing, and planning. 

Woman smiling and holding a piggy bank

Image Source: Getty Images.

Ask yourself the following eight questions. You can quantify each answer using a scale of 1 to 5, with 5 being the most positive response and 1 being the most negative.

1. Do you spend less than you make?

Resist the urge to answer this question by gut feel. In this digital age of electronic transactions and automatic bill payments, it's easy to lose touch with what you spend relative to what you make. Log in to your online accounts and look at the balances over time. If your debt increases every month or cash balances decrease every month, you're outspending your income. Your score on this indicator, then, would be a 1 or 2.

A low score here means you need to review your spending carefully. Look for expenses that can be easily cut out. Then, create a budget to keep your spending in check.

2. Do you pay bills on time?

If you regularly delay bill payments because you're low on cash, score yourself on the lower end of the scale here. As with the spending indicator above, this problem is best remedied by budgeting and cutting out unnecessary expenses. If high debt repayments are causing you problems, see Question 5 below.

3. Do you have sufficient emergency savings?

Check-in on your cash savings. A perfect score of 5 here means you have enough cash on hand to cover expenses for six months -- without borrowing or taking money from retirement accounts. If you have very little cash savings, start with a goal of accumulating enough to cover at least three months of your household expenses at your current spending level.

4. Do you have enough in long-term savings?

To score yourself here, think for a minute about your longer-term financial goals. Common ones include saving in retirement accounts, saving for the kids' college funds, and saving for a down payment on a home. Are you on a path to meeting those goals?

If not, add a line item to your budget for long-term savings. Start tucking money away today and increase that monthly savings amount every time you get a raise.

5. Do you have manageable debt levels?

High monthly debt payments put a huge strain on your finances and make it difficult to save for the future. If debt is getting in the way of your ability to pay bills and save, you'll score at a 1 or 2 for this indicator. Review what you owe and research consolidation options to lower your interest costs or at least your monthly debt payments.

You could, for example, consolidate pricey credit card debt to a home equity line of credit or personal loan. If you have great credit, a 0% balance transfer offer might be an option, as well -- assuming you can pay off the balance before the 0% rate expires.

6. Do you have an excellent credit score?

A high credit score of over 800 gives you access to the lowest interest rates on the market. That means more than bragging rights, too. As an example, personal loan interest rates can range from 6% to 36%, depending on the borrower's credit score and the amount of the loan. Assuming a three-year repayment period, a 6% interest loan equates to total interest of $952. But borrow the same amount at 36%, and you'll pay $6,489 in interest over three years. That's nearly seven times more expensive.

If you don't know your credit score, visit to get a free report.

7. Do you have enough insurance?

Insurance protects you when bad things happen. Check the amount of insurance you carry to cover your home, cars, health, and life. You'll have a lower score in this indicator if you're not confident in your coverage levels. Evaluate each part of your life to decide if you're sufficiently insured.

If you need to add coverage, comparison shop to get the lowest rates. Remember to check any options available through your employer. 

8. Do you plan ahead financially?

At the lowest end of this scale, you don't plan for the future at all. And at the highest, you're disciplined about following your budget, tracking your savings against long-term goals, and regularly evaluating your timeline to reach those goals. Most of us are somewhere in the middle.

If an honest self-assessment shows you can improve here, then commit to a regular financial planning process. The good news is, you're already taking the first step right now by establishing your baseline financial health.

Next steps

Review your scores and circle anywhere you answered 1 and 2. These are the areas to focus on now. If it feels overwhelming to tackle multiple things at once, start by prioritizing paying down high-interest debt and building up cash savings. The more you whittle down debt, the more you'll have each month to fund your savings.

You can make big improvements in your financial health by taking small actions consistently over time. It's like physical health: If you get no exercise today, you'll benefit from adding a 15-minute daily walk to your routine. Take those steps now, track your progress, and see your financial health improve over time.