There are many different things that you can do to improve your finances, but not many things are relatively simple to do for most people.
"Earn more" or "spend less" are very obvious, but you can do things to help your personal balance sheet too, such as these three actionable steps:
Build an emergency fund
A financial emergency is something would be a big deal for your life and could seriously knock you back for a long time.
Paying for a holiday or a big night out is not an emergency. For a family of four, an emergency would be the main breadwinner losing their job. For a young adult still living at home the biggest emergency would probably be their car being written off.
Therefore, it makes sense to have enough cash to cover that emergency. Everyone should aim for a $1,000 emergency fund to start off with. The young adult could aim to have in cash the price of an acceptably-safe second hand car, perhaps somewhere between $4,000 to $10,000.
The family of four would probably want at least three months of living expenses, perhaps up to six months. My own household currently has just over three months of living expenses saved up and is steadily growing/aiming for six months.
Pay down debt
Compound interest is great when it's working for you, but terrible when it's working against you. That's why banks like Commonwealth Bank of Australia (ASX: CBA) have been such good investments over the past three decades.
Debt can be useful if utilised in the right way, if you don't overdo it. But in my opinion the only debt worth taking on is for a mortgage, a loan for imperative business assets or for education.
I believe it's nearly always a good idea to pay down your debt when possible, particularly high-interest debt like credit cards.
Invest in yourself
It would be quite sad to think that today's version of yourself is the best you will ever be. There is always the opportunity to improve your worth to your current employer, future employer or your clients by studying and learning.
Investing in shares might get your 10% returns a year, but additional studying could add tens of thousands of dollars to your earnings each year for your whole career.
Foolish takeaway
Doing the above three things will significantly improve your financial well-being. It may also let you sleep easier at night and give you more confidence.
