A monitoring system and method monitor changes in clearance distances between a sensor and a rotating component of a machine. Imbalance and/or wear in the machine is identified based on the changes in the clearance distances. The system and method optionally both measure the clearance distances and a rotating speed of the rotating component of the machine with the same sensor. In order to identify imbalance in the machine, a spectral energy of the machine can be calculated based on the changes in the clearance distances, and the imbalance in the machine can be identified based on the spectral energy. The system and method can determine a trigger speed of the machine that is associated with the wear in the machine based on the changes in the clearance distance. A remaining useful life of the machine can be estimated based on changes in the trigger speed.