Financial health is just as important as physical health. It gives you the freedom to live comfortably, handle emergencies, and plan for the future. Many Australians struggle to understand their financial health or think checking it is complicated. But with a proper financial health checklist, you can review your money situation and make smart financial choices easily.
This blog will guide you step by step, with examples, calculations, and practical tips for Australians to evaluate and improve their financial health.
11 Points: Financial Health Checklist
1. Calculate Your Net Worth
Your net worth is the total value of what you own minus what you owe. It is a key measure of financial health.
How to calculate:
Assets: Savings, superannuation, investments, property, car.
Liabilities: Mortgage, personal loans, credit card debt, car loans.
Example for an Australian household:
- Assets:
- Home: AUD 600,000
- Savings: AUD 50,000
- Superannuation: AUD 80,000
- Home: AUD 600,000
- Liabilities:
- Mortgage: AUD 300,000
- Car Loan: AUD 20,000
- Mortgage: AUD 300,000
Net Worth Calculation:
Net Worth = Assets − Liabilities
= (600,000 + 50,000 + 80,000) − (300,000 + 20,000)
= 730,000 − 320,000
= AUD 410,000
A positive net worth shows you are financially stable, while a negative net worth signals the need to reduce debt or increase assets.
2. Check Your Credit Score
Your credit score reflects your financial reliability to lenders. In Australia, credit reporting agencies like Equifax, Experian, and illion provide your credit score.
Why it matters:
- A higher score increases your chances of loan approval.
- Better scores can lower mortgage or credit interest rates.
Tips to improve your credit score:
- Pay bills on time.
- Keep credit card limits under 30% usage.
- Avoid opening too many accounts at once.
Example:
If you have two credit cards with $5,000 limits and only $1,000 owed, your credit utilization is 10%, which positively impacts your score.
3. Know Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio shows what percentage of your income goes toward debt payments.
Formula:
DTI (%) = (Monthly Debt Payments ÷ Monthly Income) × 100
Example:
- Monthly income: AUD 6,000
- Monthly debts (mortgage + car loan): AUD 1,200
DTI = (1,200 ÷ 6,000) × 100 = 20%
A lower DTI is better. Lenders usually prefer a DTI under 30%.
4. Track Your Savings Rate
Your savings rate is the portion of income you save each month.
Formula:
Savings Rate (%) = (Monthly Savings ÷ Monthly Income) × 100
Example:
- Monthly income: AUD 6,000
- Savings: AUD 600
Savings Rate = (600 ÷ 6,000) × 100 = 10%
Tip: Aim to save at least 15–20% of your income for long-term goals like retirement.
5. Review Your Investment Mix
Your investment mix includes superannuation, stocks, bonds, ETFs, and cash. Each type has risks and potential returns.
Example:
- Superannuation: 60% shares, 30% bonds, 10% cash
- Personal investments: 50% shares, 50% bonds
Tip: Diversify investments to balance risk and returns. Australians nearing retirement might prefer more bonds and cash for stability.
6. Maintain an Emergency Fund
An emergency fund helps you manage unexpected events like medical bills, job loss, or urgent home repairs.
Recommended: 3–6 months of living expenses.
Example:
- Monthly expenses: AUD 4,000
- Emergency fund target: 4,000 × 6 = AUD 24,000
Keep this fund in a high-interest savings account or term deposit for easy access.
7. Manage and Reduce Debt
High debt can affect your financial health. Australia has affordable home loans, personal loans, and credit card options, but managing them is key.
Strategies:
- Debt Snowball: Pay off small debts first.
- Debt Avalanche: Pay debts with higher interest first.
Example:
- Credit card debt: AUD 5,000 at 18% interest
- Personal loan: AUD 10,000 at 12% interest
Paying the credit card first (debt avalanche method) saves interest in the long run.
8. Check Insurance Coverage
Insurance is a safety net. Australians should consider:
- Health Insurance: Covers medical costs.
- Life Insurance: Supports family if you pass away.
- Income Protection: Replaces income if you cannot work.
Tip: Review policies annually to ensure coverage matches your current financial situation.
9. Plan for Retirement
Planning retirement is crucial in Australia due to increasing life expectancy and inflation. Superannuation is the primary vehicle.
Steps:
- Estimate retirement income needed.
- Check superannuation balance.
- Increase contributions if necessary.
Example:
- Desired monthly income at retirement: AUD 5,000
- Years in retirement: 25
- Total required: 5,000 × 12 × 25 = AUD 1,500,000
Start early to leverage compound interest.
10. Review Estate Planning
Estate planning ensures your assets go to your loved ones according to your wishes.
Key documents:
- Will: Specifies who inherits assets.
- Power of Attorney: Authorises someone to manage finances if you are unable.
- Trusts: Helps manage complex estates.
Update documents after life events such as marriage, divorce, or the birth of a child.
11. Monitor Financial Stress
Financial stress affects mental and physical health. Signs include:
- Anxiety over money.
- Avoiding bills or financial decisions.
- Inability to sleep due to money worries.
Tips:
- Seek professional advice.
- Educate yourself about finance.
- Set realistic financial goals and celebrate progress.
Sample Financial Health Checklist for Australians
| Area | Action Item | Status |
| Net Worth | Calculate and track assets vs liabilities | ✅ |
| Credit Score | Check and improve | ✅ |
| Debt-to-Income Ratio | Calculate and reduce debt | ✅ |
| Savings Rate | Track monthly savings | ✅ |
| Investment Mix | Review portfolio | ✅ |
| Emergency Fund | Maintain 3–6 months of expenses | ✅ |
| Insurance Coverage | Ensure adequate health, life, income protection | ✅ |
| Retirement Planning | Contribute to super and other plans | ✅ |
| Estate Planning | Draft/update will and related documents | ✅ |
| Financial Stress | Monitor and manage | ✅ |
Also Read: Your Complete Checklist Determine Financial Health
✅ Conclusion
A financial health checklist is your roadmap to financial security and peace of mind. By assessing net worth, managing debt, saving consistently, investing wisely, and planning for retirement, Australians can build a stable financial future.
Remember, financial health is a journey. Reviewing your finances regularly, using examples and calculations to track progress, ensures long-term success. Start today, and take small consistent steps to achieve big financial goals.
