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Top 10 Steps to Improved Financial Health

1. Check your credit rating/credit score.
   It's good to know where you stand so you can shop for the best rates on financing big purchases like a home, car or auto insurance. This also helps you catch any fraudulent activity.
2. Start an emergency fund.
   We never know when the rainy day will come, but it will, so be prepared. Most experts recommend an emergency fund that covers three to six months of normal expenses.
3. Pay down/pay off high-cost debt.
   Prepare a list of your credit balances with the highest interest rate on top. Make at least the minimum payment each month on each account. Then, put your extra payments toward the balance that has the highest rate.
4. Don't turn down free money.
   Participate in savings programs up to your employer's match amount. If your employer will match your savings up to 6 percent, then strive to participate in the savings plan at least to that level. Once you reach that point, go back to step 2 and then pay down that high-interest-rate debt balance.
5. Pay your bills on time.
   This is the most important thing you can do to improve your credit rating.
6. Protect your identity.
   Shred old financial documents and junk mail, guard your Internet passwords, and frequently check your balances online to catch any fraudulent activity.
7. Devise a spending plan/budget.
   Identify needs versus wants to keep your spending from getting out of control. Include some fun items in your budget as well as necessities. Make sure you spend less than you earn so you can save to reach your financial goals.
8. Learn about investing.
   Once you have your financial foundation—you have your emergency savings in place, have paid down your high-cost debt and participate in your employer's savings plan to the maximum employer match—talk to an investment advisor about setting up an investment plan. Invest regularly and often. Revisit your plan at least annually. Revisions may be necessary.
9. Protect your wealth.
   Assess your insurance needs. Investigate your health insurance options to avoid losing your savings and good credit rating in the event of catastrophic illness. Reassess your home and auto insurance to minimize losses. Consider life insurance to cover your final expenses and provide for your family.
10. Set up a will.
    If someone needs to take over in the event of your death, make it as easy as possible by getting your affairs in order.

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e-Perspectives, Volume 6, Issue 2, 2006

Federal Reserve Bank of Dallas  Community Development Office  P.O. Box 655906, Dallas, Texas 75265-5906 214-922-5377
Gloria Vasquez Brown  Vice President		Alfreda B. Norman  Assistant Vice President and Community Development Officer
Jackie Hoyer  Houston Branch Senior Community Development Advisor		Julie Gunter  Community Development Specialist
Wenhua Di Community Development Economist		Elizabeth Sobel  Community Development Specialist
Roy Lopez Community Development Specialist
The views expressed are the authors' and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Development Office.

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