Whether you’re at the beginning of your financial journey, deep in student loan, car and credit card debt, or starting to close the gap between your career and retirement, there are always steps you can take to improve your finances.
Here are the top five money tips to improve your finances.
1. Create a financial plan
To improve your finances you need to know what your finances look like now. You also need to know what you want them to look like in the future, at varying points in time. Create one, three, and five-year goals that align with your values and future desires. Write them down, then break them up into smaller chunks. Finally, develop a plan to succeed by reverse-engineering the steps you need to take to meet your goals. Reevaluate your plan regularly and update it as you face major life changes.
2. Calculate your net worth
Your net worth is a metric that defines how much cash you would have if you sold everything you own. Your net worth is positive if you own more than you owe. On the flip side, if you owe more than you own, you’ll be in the negative. You want to strive for the highest net worth possible. Your age, salary, and spending habits can impact your net worth. Knowing your net worth number can aid you in making financial decisions, and improving it should be included in your short and long term financial plan.
3. Start an emergency fund
An emergency fund protects your budget from unexpected expenses such as a large car or home repairs, medical bills, and life changes. If you’re constantly charging emergency expenses to a credit card, you’ll never get ahead. One of the best moves you can make is to put aside money for emergencies. How much money you save will depend on the stability of your income, your lifestyle, and whether you currently live paycheck to paycheck. The recommended savings range is 3 to 6 months.
4. Understand and monitor your credit score
Your credit score is a grade to assess your risk as a creditor. Said another way, it’s your creditworthiness. It’s something lenders will look at to determine how much interest to charge you when they borrow money from them. The higher the better. It’s critical to know what your credit score is, and improve it as much as possible. Specifically, if you’re going to be making a large purchase shortly, such as buying a home. You’ll also want to monitor your credit score regularly for any inaccurate reporting against your credit and to ensure you’re not a victim of identity theft.
5. Start a side hustle
Diversifying your income is one of the top moves you can make to improve your finances. And the great thing is you can start today. Some of the most popular side hustles are blogging, freelance writing, consulting, and selling homemade items. Use the extra income from your side hustle to create your emergency fund, pay off debt, save for a big expense, or escape your 9-to-5.
What money moves have you made lately to improve your finances? Share them in the comments below.