How to Improve Your Financial Health
- A key way to improve your financial health is to learn the basics about finance.
- Managing your finances and credit is easier once you understand your credit scores, how to budget, and how to save.
- If your debts are unaffordable, consider debt relief for a financial reset.
- Saving for retirement is an important part of long-term financial health.
- The right insurance coverage helps protect you from major financial setbacks.
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No one is born a money expert. Every person with confidence and expertise started with the desire to understand how money works and the commitment to make positive changes.
The human financial condition responds to consistent, thoughtful action. Small adjustments in how you budget your money and manage your credit could create remarkable transformations over time. The strategies ahead will show you exactly how to harness the power.
This isn’t pure theory. These are practical steps that real people use every day to build the financial lives they want. Take a look.
1. Know How Credit Scores Work
Your credit profile is one indicator of your financial health. Most people know that a higher credit score means they’ll qualify for loans, credit cards, and mortgages more easily and at lower rates. But many don't know how credit scores are calculated.
Lenders use credit scores to determine how likely you are to pay back a loan. The most widely used credit score is the FICO Score, developed by the Fair Isaac Corporation. All three credit bureaus—Experian, Equifax, and TransUnion—use this scoring system to determine a score.
“FICO Score” and “credit score” might be used interchangeably, but they’re not precisely the same thing. You have other credit scores besides your FICO Score. FICO is just one kind.
The credit scores we rely on most often range from 300 to 850. Your score is based on how you’ve handled credit accounts in the past. Here is the breakdown of how credit scores are calculated:
Know how credit scores work
| Factor | What could work in your favor | What could work against you | Weight |
|---|---|---|---|
| Payment History | Consistently paying bills on time | Delinquent accounts or missing payments | 35% |
| Amounts owed | Low credit card balances | High credit card balances | 30% |
| Length of Credit History | Longtime accounts | New accounts | 15% |
| Credit Mix | A variety of credit accounts, such as student loans and credit cards | Little or no credit variety | 10% |
| New Credit Applications | Applying for credit sparingly | Applying more often | 10% |
You can request free weekly copies of your credit report from all three bureaus at annualcreditreport.com. You answer some identity verification questions to prove who you are, then you can review the information on the reports, make sure it's correct, and dispute any false information.
Under the Fair Credit Reporting Act, credit bureaus must investigate any disputed items and remove them if they are incorrect. If you see inaccuracies on any of your credit reports such as a wrong address, missed payment, or incorrect outstanding balance, contact the credit bureau and ask them to review the mistake. You should also contact the financial institution associated with the account to let them know about the error.
Aim to review your credit reports at least once a year. You may want to check more frequently if you've been the victim of identity theft, or if you plan to apply for credit soon.
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2. Make a Budget
Evaluating your financial situation is a great way to make sure you’re practicing good habits that could help you get ahead. You don’t need an expert to review your personal finances to get started. All you have to do is create a budget.
One common framework is the 50/30/20 budget. That means using about 50% of your after-tax income for needs, 30% for wants, and 20% for savings and debt payments. You can adjust the percentages to fit your situation.
First, make a list of all your monthly expenses, such as housing, transportation, food, utilities, insurance, childcare, and so on. Then, subtract your expenses from your monthly income after taxes. If you have money in your budget after paying all your expenses, you’re on the right track with your personal finances. You can then decide where any extra money goes—for example, to savings, retirement, or to pay off your debts.
If you find that you run short on money or you rely on credit cards to fill the gap between your income and expenses, it’s time to adjust.
There are two ways to find money in your budget. You can spend less or you can earn more.
If a pen-and-paper budget or a budgeting spreadsheet doesn’t work for you, consider downloading a budgeting app. These can do the math for you. Many apps link with your existing financial accounts to keep track of your transactions automatically. They’re also good for setting and meeting goals, and showing you progress. This could make your budget a little easier to stick with.
3. Pay More than the Minimum
Making the minimum payment on your credit card is key to avoiding late fees and negative marks on your credit score. But it’s not a good strategy for getting rid of debt. Minimum payments are designed to keep you in debt for a long time.
Always pay more than the minimum if you're able to. This could help you reduce how much you pay in interest charges over time and move you out of debt more quickly.
Paying more than the minimum could also help you lower your credit card balance, which is a big factor in your credit score.
Credit utilization is your credit card balance compared to the credit limit on the card. If you make the minimum payments but keep charging new purchases to the card, your credit utilization might not go down. Worse, it could go up. Paying more than the minimum can help you get your balance moving in the right direction: down.
People just like you are seeking debt relief in Colorado Springs, CO and across the country. The first step is the most important one—explore your options.
4. Choose a Debt Payoff Strategy
Once you know how much you could put toward debt each month, decide which balances to tackle first. Two common approaches are the debt avalanche and the debt snowball.
Debt avalanche method: List your debts by interest rate. Put any extra money toward the balance with the highest rate, and keep making minimum payments on the rest. Once you’ve paid off that balance, move to the balance with the next-highest rate, adding the payment you were making to the new debt’s minimum payment, creating the “avalanche.” This approach could save you the most money in interest charges over time.
Debt snowball method: List your debts by balance size, and target the smallest balance first, paying as much as you can toward it. Then move to the next smallest, adding the payment you were making on the first debt to the new debt’s minimum payment. This method doesn't always save the most in interest compared to the debt avalanche method, but once you clear a balance, you may feel more motivated to keep going.
Both methods can work well if you stay consistent. Choose the one that best matches how you stay motivated.
5. Start Your Emergency Fund
An emergency fund is the protective shield between you and debt. Having money in savings for an emergency could mean you avoid adding to your debt when an unexpected expense comes up. And unexpected expenses come up for everyone. Saving even a few dollars out of each paycheck could save you from a huge financial headache.
A high-yield savings account is the best place to keep emergency savings. Look for an account that pays interest and doesn’t charge a monthly maintenance fee. Consider keeping your everyday checking account and your emergency savings account at different banks, which could help you avoid the temptation to dip into your savings. Set up an automatic funds transfer from your checking account to your high-yield savings account each payday.
Automating this transfer is one of the simplest ways to stay consistent, since the money moves before you have a chance to spend it.
6. Protect What You've Built
An emergency fund covers small, unexpected costs. Insurance protects you against larger risks like a serious illness, an accident, or a major loss of property. Common types of insurance to review include:
Health insurance to help cover medical costs
Auto insurance if you own a vehicle, which is required in most states
Renters or homeowners insurance to protect your belongings and living space
Life insurance, if other people depend on your income
Review your coverage once a year to confirm it still matches your needs.
7. Grow Your Wealth for the Future
Most people focus on paying down debt and building an emergency fund first. Once those are in place, saving for the future helps you build wealth over time.
If your employer offers a 401(k) plan, contributing to it is one way to save for retirement, especially if your employer matches part of your contribution. An Individual Retirement Account (IRA) is another option that offers tax advantages. A Roth IRA is a way to contribute money you've already paid taxes on, so withdrawals in retirement are generally tax-free.
Index funds and exchange-traded funds (ETFs) put your money into a wide mix of stocks or bonds. This spreads out your risk, so you aren’t relying on the performance of a single company, or just a few.
Investing involves risk, including the possible loss of the money you invest. Consider talking with a financial professional about which options best fit your goals.
8. Give Your Financial Health a Boost
If you’re struggling with debt or worried about falling behind on payments, take action beyond simple budgeting strategies. Freedom Debt Relief is here to help you understand your options for dealing with your debt, such as our debt settlement program. Settling a debt means getting your creditor to agree to accept less than the full amount, and forgive the rest. It’s something creditors may be willing to do if you can’t afford to fully repay your debts.
Our Certified Debt Consultants can help you find a solution that will put you on the path to improve your financial health. Find out if you qualify.
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during February 2026. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Age distribution of debt relief seekers
Debt affects people of all ages, but some age groups are more likely to seek help than others.
In February 2026, the average age of people seeking debt relief was 56. The data showed that 31% were over 65, and 11% were between 26-35. Financial hardships can affect anyone, no matter their age, and you can never be too young or too old to seek help.
Student loan debt – average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average student debt for those with a balance was $46,980. The percentage of families with student debt was 22%. (Note: It used 2022 data).
Student loan debt among those seeking debt relief is prevalent. In February 2026, 27% of the debt relief seekers had student debt. The average student debt balance (for those with student debt) was $48,703.
Here is a quick look at the top five states by average student debt balance.
Next 2 - Student debt by states
| State | Percent with student loans | Average Balance for those with student loans | Average monthly payment |
|---|---|---|---|
| District of Columbia | 34 | $71,987 | $203 |
| Georgia | 29 | $59,907 | $183 |
| Mississippi | 28 | $55,347 | $145 |
| Alaska | 22 | $54,555 | $104 |
| Maryland | 31 | $54,495 | $142 |
The statistics are based on all debt relief seekers with a student loan balance over $0.
Student debt is an important part of many households' financial picture. When you examine your finances, consider your total debt and your monthly payments.
Support for a Brighter Future
No matter your age, FICO score, or debt level, seeking debt relief can provide the support you need. Take control of your financial future by taking the first step today.
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Author Information
Written by
Kailey Hagen, CFP
Kailey is a CERTIFIED FINANCIAL PLANNER® Professional and has been writing about finance, including credit cards, banking, insurance, and retirement, since 2013. Her advice has been featured in major personal finance publications.
Reviewed by
James Heflin
James Heflin is a financial editor for Freedom Debt Relief. His porfolio also includes Achieve, The Motley Fool, and The Valley Advocate newspaper in Western Massachusetts. He holds an MFA from the University of Massachusetts Amherst and an MA from Hollins University. He's a science fiction writer and Gypsy jazz guitarist. His book Krakatoa Picnic came out in 2017.
How can I improve my financial health?
Improving your financial health starts with understanding the factors that influence it, like your credit score. Sticking to a budget is also helpful, as is building an emergency fund to protect yourself against unexpected expenses. Be patient! It takes time and consistency to build up your savings or make a noticeable change to your credit score—but you’ll get there if you keep plugging away.
How do I rebuild my financial life?
Rebuild your financial life with a few systematic steps. Start by taking stock of where you're at right now. Jot down your bank account balances and how much debt you have. Check your credit scores and identify any issues, such as late payments, that may be hurting you. Then, decide on a list of priorities. For instance, you might want to work on your credit score. Next, come up with actionable steps, like making the minimum payments on your card each month, to make your goal a reality.
What are the top three financial habits?
Three of the most impactful financial habits are:
Build and maintain an emergency fund
Pay your bills on time
Stick to a budget
Debt Solutions
Debt Solutions
