What is a common indicator of financial health?

The ratio of savings to expense levels serves as a common indicator of financial health because it provides insight into an individual's ability to manage their finances effectively. A higher savings-to-expense ratio indicates that a person is saving a significant portion of their income relative to what they are spending. This suggests that they are living within their means and building a financial cushion, which is crucial for long-term stability and security.

In financial planning, this ratio helps evaluate how well someone is preparing for emergencies, retirement, or other financial goals. When individuals save more than they spend, they are likely to have more resources available for future needs, investments, and unexpected expenses. Overall, a healthy savings-to-expense ratio is a strong indicator of good financial management and forecasting capabilities, which are essential components of financial health.

While the total amount of debt and the consistency of cash flow are important aspects of a person's financial situation, they don't necessarily provide a complete picture of financial health on their own. For instance, someone might have a high total amount of debt but still manage it well, or they might have inconsistent cash flow yet still maintain a high savings rate. Similarly, the number of financial accounts held does not directly correlate with financial stability or health.