Financial Health

Understanding Your Financial Health

The Financial Health feature provides a comprehensive assessment of your overall financial wellbeing, helping you identify strengths, weaknesses, and opportunities for improvement.

What is Financial Health?

Financial health refers to the overall condition of your financial situation, including:

  • How well you manage day-to-day finances
  • Your ability to absorb financial shocks
  • Whether you're on track to meet financial goals
  • The freedom you have to make choices that improve your life
Why Financial Health Matters

Tracking your financial health is important because:

  • It provides a holistic view beyond individual transactions or accounts
  • It helps identify areas needing improvement
  • It measures progress toward long-term financial security
  • It connects daily financial decisions to big-picture outcomes
  • It reduces financial stress by giving you clarity and direction
How Cognito Money Measures Financial Health

Cognito Money evaluates your financial health across multiple dimensions:

  • Spending Management: How well you live within your means
  • Savings Rate: How much of your income you save
  • Debt Management: How effectively you manage and reduce debt
  • Emergency Preparedness: Your ability to handle unexpected expenses
  • Goal Progress: How well you're tracking toward financial goals
  • Financial Behaviors: The consistency of positive financial habits
Accessing Financial Health

Access your Financial Health assessment:

  1. Click on More>Financial Health in the main navigation menu
  2. Click on the health score widget on your Dashboard

Understanding Your Score

The Financial Health Score is a numeric rating from 0-100 that represents your overall financial wellbeing:

  • 80-100: Excellent - You demonstrate strong financial management across all dimensions
  • 60-79: Good - You have solid financial habits with some areas for improvement
  • 40-59: Fair - You're managing in some areas but have significant opportunities for improvement
  • 0-39: Needs Attention - Your financial health has several key areas requiring immediate focus
How Your Score is Calculated

Your Financial Health Score is derived from four key dimensions, each contributing up to 25 points to your total score:

Dimension Weight What It Measures Target
Savings Rate 25% How much of your income you save each month 20% or higher
Debt-to-Income Ratio 25% The proportion of monthly income going toward debt payments Below 36%
Emergency Fund 25% How many months of expenses your emergency fund covers 3-6 months
Expense-to-Income Ratio 25% The proportion of your income that goes to regular expenses Below 50%
Score Visualization

Your score is displayed prominently in the Financial Health Dashboard:

  • A circular gauge shows your numeric score (0-100)
  • Color-coding indicates your status category (Excellent, Good, Fair, Needs Attention)
  • Progress bars visualize performance in each dimension
  • A trends chart shows changes in income, expenses, and savings rate over time
Tip:

Don't be discouraged by a lower initial score. The Financial Health Score is designed to help you identify opportunities for improvement. Focus on improving one dimension at a time, starting with your lowest-scoring dimension for maximum impact.

Understanding Each Financial Health Dimension

Each dimension of your financial health provides specific insights and contributes equally to your overall score:

1. Savings Rate

This crucial metric shows how much of your income you're preserving for the future:

  • Calculation: (Income - Expenses) ÷ Income × 100%
  • Target: 20% or higher of your income saved
  • Score contribution: Up to 25 points, with 20% savings rate earning full points
  • Improvement strategies: Reduce non-essential spending, increase income, automate savings transfers
  • Why it matters: A strong savings rate is the foundation of wealth building and future financial security
2. Debt-to-Income Ratio

This measures the burden of debt payments relative to your income:

  • Calculation: Monthly Debt Payments ÷ Monthly Income × 100%
  • Target: Below 36% (less than 36% of income going to debt payments)
  • Score contribution: Up to 25 points, with 0% debt ratio earning full points
  • Debt identification: System identifies debt from categories like "Credit Cards", "Loans", "Mortgage" and keywords in subscription names
  • Improvement strategies: Prioritize debt repayment, consider debt consolidation, avoid taking on new debt
  • Why it matters: Lower debt ratios mean more financial flexibility and reduced financial stress
3. Emergency Fund

This assesses your preparedness for unexpected financial challenges:

  • Calculation: Emergency Fund Amount ÷ Monthly Expenses
  • Target: 3-6 months of expenses covered by your emergency fund
  • Score contribution: Up to 25 points, with 6 months of coverage earning full points
  • Setup requirement: Create a Financial Goal named "Emergency Fund" to track this metric
  • Improvement strategies: Set up automatic transfers to your emergency fund, use windfalls to boost savings
  • Why it matters: An adequate emergency fund prevents you from going into debt when unexpected expenses arise
4. Expense-to-Income Ratio

This measures how much of your income is consumed by regular expenses:

  • Calculation: Monthly Expenses ÷ Monthly Income × 100%
  • Target: Below 50% of income going to regular expenses
  • Score contribution: Up to 25 points, with 50% or lower ratio earning full points
  • Expense sources: Based on your monthly subscription payments tracked in the system
  • Improvement strategies: Review and eliminate unnecessary subscriptions, negotiate better rates for services
  • Why it matters: Lower fixed expenses provide more flexibility for saving, investing, and discretionary spending
Dimension tip:

For accurate dimension calculations, ensure all your income sources are properly configured, your Emergency Fund goal is set up, and your monthly subscriptions are correctly entered and categorized in the system.

Financial Health Recommendations

Cognito Money's Financial Health feature provides targeted recommendations based on your metrics:

  • System analyzes your four key dimensions against target thresholds
  • Recommendations appear when dimensions fall below specific levels
  • Suggestions are prioritized by potential impact on your overall score
  • General financial health tips are also provided for ongoing improvement
Recommendation Triggers

Specific recommendations appear when your metrics fall below these thresholds:

  • Savings Rate: Recommendation triggered if below 15%
  • Debt-to-Income Ratio: Recommendation triggered if above 30%
  • Emergency Fund: Recommendation triggered if below 3 months of expenses
  • Expense-to-Income Ratio: Recommendation triggered if above 70%
Improvement Strategies by Dimension
Improving Your Savings Rate
  • Track all income: Ensure all income sources are properly recorded in the system
  • Categorize expenses: Properly categorize transactions to identify savings opportunities
  • Increase income gap: Focus on either reducing expenses or increasing income
  • Automate savings: Set up automatic transfers to savings accounts on payday
  • Follow the 50/30/20 rule: Allocate 50% to needs, 30% to wants, and 20% to savings
Reducing Your Debt-to-Income Ratio
  • List all debts: Ensure all debt accounts are properly entered as subscriptions
  • Use debt reduction strategies: Apply the snowball or avalanche method to pay off debts
  • Avoid new debt: Refrain from taking on additional debt while paying down existing obligations
  • Refinance when possible: Look for opportunities to consolidate or refinance at lower rates
  • Increase income: Consider additional income sources to accelerate debt repayment
Building Your Emergency Fund
  • Create an Emergency Fund goal: Set up a specific financial goal named "Emergency Fund"
  • Start small: Begin with a mini-emergency fund of $1,000
  • Update your progress: Keep your emergency fund amount updated in the system
  • Build gradually: Aim for 1 month of expenses, then 3 months, then 6 months
  • Use separate accounts: Keep emergency funds in a dedicated high-yield savings account
Optimizing Your Expense-to-Income Ratio
  • Audit subscriptions: Review all recurring expenses for necessity and value
  • Negotiate rates: Contact service providers to lower monthly costs
  • Consolidate services: Look for opportunities to combine or eliminate duplicate services
  • Track fixed expenses: Ensure all monthly subscriptions are correctly entered in the system
  • Rethink housing costs: Consider if your housing expense aligns with your income (ideally 25-30%)
Implementing Improvements

Follow this systematic approach to enhance your financial health:

  1. Review your current scores to identify your weakest dimension
  2. Focus first on the dimension with the lowest score relative to its target
  3. Select 1-2 specific actions from the improvement strategies above
  4. Update your financial data in Cognito Money as you make changes
  5. Check your Financial Health score monthly to monitor progress
Tip:

Small, consistent improvements are more effective than dramatic changes that are difficult to maintain. Look for the "quick wins" first - actions that are relatively easy to implement but will have a meaningful impact on your score.

Understanding Your Financial Health Dashboard

Cognito Money presents your financial health information in a dashboard format with several key components:

Overall Financial Health Score

A visual representation of your overall financial health:

  • Numeric score from 0-100 displayed in a circular gauge
  • Color-coded status indicator (Excellent, Good, Fair, Needs Attention)
  • Brief explanation of how the score is calculated
Key Financial Metrics

Visual progress bars for each of the four core financial dimensions:

  • Savings Rate: Percentage of income you're saving
  • Debt-to-Income Ratio: Percentage of income going to debt payments
  • Emergency Fund: Number of months of expenses covered
  • Expense-to-Income Ratio: Percentage of income going to expenses
Monthly Financial Summary

Quick reference panels showing key financial figures:

  • Monthly income and expenses totals
  • Current account balance
  • Monthly debt payment amount
Financial Trends Chart

Interactive chart showing your financial trends over the past 6 months:

  • Income Line: Monthly income amounts
  • Expenses Line: Monthly expense amounts
  • Savings Rate Line: Monthly savings rate percentages
Personalized Recommendations

The dashboard provides tailored recommendations based on your current financial metrics:

  • Prioritized suggestions for improving your financial health
  • Recommendations targeted to your weakest dimensions
  • General financial health tips for ongoing improvement
Dashboard tip:

Check your Financial Health Dashboard monthly to track your progress and identify which areas need attention. Pay special attention to the trend chart to spot patterns in your financial behavior over time.

How Your Financial Health Score Is Calculated

Cognito Money calculates your financial health score using a weighted formula based on four key dimensions:

1. Savings Rate (25% of Score)

Measures how much of your income you're saving:

  • Calculation: (Income - Expenses) / Income × 100%
  • Target: 20% or higher savings rate
  • Score Contribution: Up to 25 points, with 20% savings rate earning full points
  • Importance: Indicates your ability to build wealth and prepare for the future
2. Debt-to-Income Ratio (25% of Score)

Evaluates your debt burden relative to income:

  • Calculation: Monthly Debt Payments / Monthly Income × 100%
  • Target: Below 36% (lower is better)
  • Score Contribution: Up to 25 points, with 0% debt ratio earning full points and 36% or higher earning 0 points
  • Importance: Indicates financial flexibility and reduced financial stress
3. Emergency Fund (25% of Score)

Assesses your readiness for unexpected expenses:

  • Calculation: Emergency Fund Amount / Monthly Expenses
  • Target: 6 months of expenses or more
  • Score Contribution: Up to 25 points, with 6 months of coverage earning full points
  • Importance: Provides financial security during unexpected events
4. Expense-to-Income Ratio (25% of Score)

Measures how much of your income goes to expenses:

  • Calculation: Monthly Expenses / Monthly Income × 100%
  • Target: Below 50% (lower is better)
  • Score Contribution: Up to 25 points, with 50% or lower ratio earning full points
  • Importance: Indicates sustainable living expenses and budget management
Status Determination

Based on your total score (0-100), your financial health status is categorized as:

  • 80-100: Excellent
  • 60-79: Good
  • 40-59: Fair
  • 0-39: Needs Attention
Score improvement tip:

Focus on improving your lowest-scoring dimension first. For example, if your emergency fund score is low, prioritize building that fund before focusing on other dimensions. This targeted approach will maximize your overall score improvement.

Tips for Optimal Financial Health
  1. Focus on fundamentals first - Ensure a solid foundation of spending less than you earn
  2. Build habits, not just numbers - Sustainable behaviors matter more than short-term improvements
  3. Automate key financial tasks - Set up automatic transfers for savings and bill payments
  4. Regularly review all dimensions - Don't neglect any aspect of your financial health
  5. Celebrate progress milestones - Acknowledge improvements to maintain motivation
  6. Practice financial mindfulness - Be intentional about financial decisions large and small
  7. Adjust for life changes - Update your goals and strategies when circumstances shift
Financial Health Maintenance Schedule

Establish a routine to maintain and improve your financial health:

Weekly Actions
  • Review recent transactions and ensure they're properly categorized
  • Check progress on weekly spending targets
  • Address any financial tasks or decisions that arose during the week
Monthly Actions
  • Review your Financial Health Score and dimension ratings
  • Check progress on short-term financial goals
  • Review budget performance and make necessary adjustments
  • Ensure all bills were paid on time
Quarterly Actions
  • Conduct a deep dive into all financial health dimensions
  • Review and update your improvement plan
  • Check investment performance and asset allocation
  • Review insurance coverage and needs
Annual Actions
  • Perform a comprehensive financial health assessment
  • Review and update all financial goals
  • Conduct a tax planning review
  • Review estate planning documents
  • Reassess life stage priorities
Common Financial Health Pitfalls to Avoid
  • Lifestyle inflation - Increasing spending as income rises, preventing savings growth
  • Neglecting emergency funds - Prioritizing other goals before establishing financial security
  • Debt dependency - Relying on credit to maintain lifestyle
  • All-or-nothing thinking - Giving up after setbacks instead of adjusting plans
  • Financial avoidance - Ignoring problems rather than addressing them
  • Comparison trap - Measuring financial health against others' visible spending
  • Short-term focus - Sacrificing long-term security for immediate wants
Success habit:

The most financially healthy users combine numerical tracking with mindful decision-making. They regularly review their financial health dashboard but also practice conscious spending by pausing before purchases to consider alignment with their values and goals.

Common Issues and Solutions
Problem: Financial Health Score seems inaccurate or too low
Solutions:
  1. Ensure all your transactions are properly categorized
  2. Verify that your income sources are correctly configured
  3. Check that your monthly subscriptions are accurately listed
  4. If you have an Emergency Fund goal, make sure it's properly tracked
  5. Review the score calculation formula to understand which dimensions need improvement
Problem: Emergency Fund months calculation is incorrect
Solutions:
  1. Create a financial goal specifically named "Emergency Fund" if you don't have one
  2. Make sure you're tracking your current emergency fund amount in that goal
  3. Check that your monthly expenses are accurately tracked in the system
  4. The calculation is based on: Emergency Fund Amount ÷ Monthly Expenses
Problem: Debt-to-Income ratio seems incorrect
Solutions:
  1. Ensure debt payments are properly tagged as debt in your subscriptions
  2. Debt is identified by category names like "Credit Cards", "Loans", "Mortgage", "Debt"
  3. Debt is also identified by keywords in subscription names ("loan", "credit", "mortgage", etc.)
  4. Verify your income sources are correctly set up with accurate monthly amounts
Problem: Financial Trends chart not displaying correctly
Solutions:
  1. Refresh the page to ensure the latest data is loading
  2. Check that you have transaction data entered for recent months
  3. Clear your browser cache and try again
  4. Try using a different browser if chart visualization issues persist
Problem: Recommendations don't match your financial situation
Solutions:
  1. Recommendations are generated based on metric thresholds (savings rate < 15%, debt ratio > 30%, etc.)
  2. Make sure all your financial data is up-to-date for accurate recommendations
  3. The system will show general tips even if no specific recommendations are triggered
  4. If you believe the recommendation logic is incorrect, check the calculation methods described in this help section