10 Ways to Improve Your Financial Health

Trying to improve your finances? In “10 Ways to Improve YourFinancial Health,” TIME Moneyland offers 10 ways that you can get a start on rebuilding those finances.

1. Grow Your Emergency Fund

In these times of high unemployment rates, you should shoot for an emergency fund with 6 months worth of savings instead of the traditionally recommended 3 months. The key is to be able to manage emergencies from savings rather than having to liquidate your retirement account or relying on a high interest credit card. Jim Wang, a blogger from Bargaineering.com says, “Trying to resolve an emergency with a credit card can lead down a dangerous path of debt.”

2. Pay Off Credit Card Debt

Tom Gilovich, a psychology professor at Cornell University and coauthor of Why Smart People Make Big Money Mistakes says you should use your existing savings to pay off or pay down credit card debt. With current credit card APRs averaging around 15%, people with credit card debt pay more in interest than they can earn with that money invested elsewhere.

3. Put 10% of Your Income Toward Retirement

No matter how much or how little you make, it’s a good idea to stick to this rule. If you start saving and investing $5,000 a year when you’re 25 years old and earn a 6% rate of return, that money will have grown to $773,809 by the time you are 65!

4. Pay Off Your Mortgage Before Retiring

Richard Thaler, behavioral economist at University of Chicago says, “The term of your mortgage should not be longer than the number of years you plan to work.” After retirement, your income will probably drop but your cost of living won’t. If you can eliminate your monthly mortgage payment, you’ll have more flexibility to handle other costs that will probably increase in retirement, such as health care.

5. Track Your Spending

You’ve probably heard this tip before, but have you put it into practice? Gail Cunningham says, “It’s a basic building block of financial success.” New Century IDA participants take a budgeting course in which they learn the importance of tracking all of their expenditures. It helps them find areas in which they can cut back.

6. Envision Your Future

Don Chambers, author of MoneyBasics for Young Adults, says you should develop a mental picture of where you want to be in five years. This will be great motivation for sticking to your financial plan.

7. Improve Your Credit Score

Did you know that maintaining a score of 750 or higher can improve your finances? “A higher score will get you lower interest rates and lower interests can save you hundreds of thousands over your financial lifetime,” says Elisabeth Leamy, author of Save Big. The potential for savings is even greater when it comes to home mortgages. This is why New Century IDA participants work so hard to improve their credit score in preparation for homeownership.

8. Live Below Your Means

We’ve all heard this phrase: “Just because you can afford to buy something, doesn’t mean you should.” If you get a raise, maintain your former standard of living and funnel the rest into paying off debts or adding to your retirement savings.

9. Act Like You Can’t Just “Throw It Away”

Kerry Taylor, blogger at Squawkfox.com says, “If you act like you can’t just throw stuff away, it will make you more mindful about what you buy and consumer in the first place.” Switch to buying quality items that will endure.

10. Move Your Money Around

Carmen Wong Ulrich, cofounder of ALTA Wealth Management recommends redirecting money from one part of your financial life to another part that may be more profitable.

These are some great tips to help you get started on your path towards improved financial health. Maybe just pick one or two to focus on at first, then as you feel comfortable with your new financial habits, add more of these tips to your list. Do you have any of your own tips to add?