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3 Indications of Healthy Finances


Since getting married three years ago, I have become more serious about being responsible with my finances. It started when I was forced to keep track of my spending because my wife and I simply didn’t earn enough not to budget. In just a short period of time, we have created a system to limit any extra spending, have doubled our income, and are now investing for our future in more ways than the average person.

The truth is that thinking about my financial future excites me. While my wife doesn’t share the same excitement, she agrees with our goals and wouldn’t have it any other way. As much excitement as I feel about how things are going right for us, I feel just as much frustration about people making bad decisions. While I understand that everyone has to make their own choices, there are some times when I have to hold my tongue when people make bad financial decisions.

In the past month, a friend of mine has not only told me how much debt he has in student loans, but also bought a new car. In trying to explain to him that it wasn’t the best decision, I was forced to think of the reason(s) WHY it wasn’t a good decision for him financially. After all, telling someone that they made a bad decision won’t persuade them unless you can back up your claim with good reasons. Doing so, led me to come up with a list of indications of healthy finances. In other words, if you are looking for a checklist or a comparison tool to gauge your success, here’s a great way to see if your finances are in order.

Indications of Healthy Finances

Everyone’s finances are different, but it doesn’t mean that there are not key characteristics that can highlight whether someone is successfully managing their finances. Below are a few features of what I would consider healthy finances:

Spending Less than You Earn

This is one of the most basic principles to finance that there is. If you are spending more money than you earn, you are setting yourself up for failure. Sometimes it may be impossible to avoid, but for the most part spending less than you earn is easy enough to achieve. Once you conquer this, a good challenge is to see how low of a percentage of your income you can live off of.

Regularly Investing Money

My wife and I started investing with our Roth IRAs. At the time, we didn’t have an employer retirement fund, and we knew that these investment vehicles offered many tax benefits. They also served as a practical goal us as young adults to save for retirement. If we could max out our Roth IRAs each year, while waiting to qualify for employer 403(b)’s, we could feel pretty good about ourselves. It’s surprising how few people feel the same way. Out of our group of friends, only one other family is investing in retirement already. I hate to think about how hard it will be for the others to save for retirement by starting years later than everyone else. Investing money on a regular basis is the key to financial success. Managing your finances isn’t just about spending less – it’s also about directing your extra money to earn more money for you in the future.

Avoiding Major Unnecessary Expenses

Last, but certainly not least is the ability to control your unnecessary spending. This is where a lot of people fail. When accomplishing the first two goals (saving money and investing money), many people feel a certain degree of pride. Part of this is because they compare themselves, as I do, to others who suck at managing their finances. The rationale is then something like this: “We’re a lot better off then them, so we can afford to splurge.” What happens next is that people spend money that they could be putting to better use.

A great example of this is my friend that just bought a car. He and his wife are earning decent salaries now for the first time in their adult life. They probably have more money than they know what to do with. Despite still having lots of school loans, my friend just bought a car. While I don’t think he is leasing the car, he definitely isn’t paying for the car in cash. This means he is adding more monthly expenses to his budget instead of getting rid of some. The best part of the equation is that he is within walking distance from his job. He works less than half a mile from his apartment. If you are looking for a great indication of whether you are being responsible with your money, there is no better criterion than whether you are avoiding major expenses that are unnecessary.

How are you doing with these three simple guidelines? 

What things would you add to this list?

This post was written by Corey, a staff writer from 20’s Finances. He writes to educate young adults about their finances.

Budget Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Check, check, and check! Although I did just get a hand-me-down iPhone from my dad and it added $30/month to our expenses. Not quite a “necessity” ;). Our budget is mainly based off of my husband’s salary. Any income I make from my jobs goes toward our financial goals.

  2. I think I am doing pretty awesome with your three rules. I am so gladbi started saving for retirement in my first job!

    • I’m glad too. It really make a huge difference.

  3. I was like your friend when I first started making money. Have seen the error of my ways and would advise any person just out of school to follow your rules.

  4. Thanks Kim. Yeah, I guess it’s just a matter of time before he catches on. 🙂 I hope, at least.

  5. I can’t say that I’m on track with all of these goals myself – but I’m working towards them. However, for your friend, he could buy a bike instead and be at work in 3 minutes! Bikes are a lot less expensive than cars. 😉

  6. Corey, excellent points, all of them!

    I truly wish I would have woken up when I was anywhere near my 20’s. I’d have been much better off today!

    And I agree, that you can’t just say “that was stupid to get into more debt although you just told me last week how broke you already are”. 🙂

    Definitely a fine line and I think you crossed it correctly.

  7. And trying to play catch-up 10-15 years down the road is even harder, trust me since I speak from experience! 🙁

    I have to get closer to Financial Samurai’s withholdings, just to make sure I’ll be ok in retirement.

  8. Avoiding unnecessary expenses is the rough one, I think. It’s hard to define unnecessary at times. That and it’s nice to have a treat once in a while. it’s all about balance, I suppose.

  9. These three decisions are the foundation of money management. To add to these you can look to increase income or perfect a money making skill to be used as side business income.

  10. Be responsible with your money and more importantly SAVE!

    Excellent tips though Corry, a bit of common sense can go a long way when it comes to your finances.


  11. These are really helpful tips. I always feel about healthy finance. These are great indicator of healthy finance. I always try to spend less than I earn and avoid unnecessary expenses. At the end of the year, I really have a handsome amount at my hand. But I don’t know how to and where to invest.

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