6 realistic steps to improve you personal finances

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Joey Held

As a writer, Joey Held has specialized in business, marketing, sports, music and insurance topics for more than a decade. He's also a podcaster …

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Ross Martin

Insurance Writer

  • 4+ years in the Insurance Industry

Ross joined The Zebra as a writer and researcher in 2019. He specializes in writing insurance content to help shoppers make informed decisions.

Ross h…

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Susan Meyer

Senior Editorial Manager

  • Licensed Insurance Agent — Property and Casualty

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebr…

Money is freedom. Having enough of it can mean having more choices. Disposable income can give us a cushion when something goes wrong. Having more money and using it responsibly will also raise your credit score, which opens a lot of doors. 

On the flip side, not having enough money, being in debt and living pay check to pay check can quickly make you feel trapped. It can be difficult to know where to start to dig yourself out of the hole.

Without a sudden windfall or a huge increase in income, you're probably not going to go from deeply in debt to milionaire status overnight. But there are realistic steps you can take that can help you improve your personal finances.  

Step 1: Pay down your largest or smallest amount of debt first

The average American has 2.7 credit cards and a debt balance of $5,315.[1] Having that debt can be worrisome and lead to financial trouble down the road, so it’s a good goal to pay it off.

There are several methods for paying down debt, and two of the most common are the avalanche method and snowball method. Luckily, you don’t have to be an avid skier to use them.

Avalanche method

With the avalanche method, you pay your most expensive balance first.

  • List out all your debts from the highest interest rate to the lowest.
  • Determine the total amount of money you can put toward your debt each month.
  • Make the minimum monthly payment on each card, mortgage or other debt.
  • Put your remaining cash toward the highest-interest debt.

This strategy helps reduce the amount of money you’ll spend toward interest, since you’re removing the highest percentage first. The key is to stick with paying down debt on each subsequent card. Once you’ve paid off your first debt, keep your payments going to the next one.

Snowball method

If that strategy seems difficult, consider the snowball method, instead. This strategy goes the opposite route: you pay off your smallest debts first, then work your way up to the larger ones. You’ll still make minimum payments on all cards and bills, you’ll just focus on the smallest one and put your additional cash toward it, then move on to the second-smallest, and so on.

The benefit here is seeing multiple wins unfolding before your eyes. If you achieve paying off any kind of debt, even a small one, that’s a great feeling. Having those accomplishments play out can be highly motivating to get rid of the rest of your debts.

Step 2: Increase monthly savings by reviewing expenses

Wouldn’t it be nice to have a little additional money each month? It could go toward savings accounts, home repairs or even a splurge here or there. That all starts by bumping up your monthly savings.

Overall savings have increased since the pandemic began.[2] While a lot of those savings can be attributed to high-income households, it’s still an encouraging sign that more people are understanding the importance of saving.

One of the best ways to save some extra money is to see where your money is currently going. A spreadsheet with money coming in and going out opens your eyes to areas where you may be overindulging.

Once you’ve identified what you’re putting money toward:

  • Create a spending plan.
  • List out your necessary expenses: rent or mortgage, utilities, groceries, gas, insurance and savings accounts.
  • Create categories for other types of non-essential expenses, like movies or concerts, travel or games. 

When you see all of that laid out, it’s a lot easier to stick with it. Plus, a plan with what you can spend is less restrictive than putting…well, hard restrictions on what you can’t buy. There are several financial tools that can get you started and monitor your spending from month to month, offering advice along the way.

Step 3: Grow money longterm by investing wisely

While monthly savings are wonderful, perhaps you’ve got your sights set on bigger goals. You could be saving up for a big investment down the road — a child, a new car, major home repairs — or just simply want to put your money to work.

After all, we don’t know what might pop up in five or ten years, so trying to grow the money you already have is never a bad strategy. And when you retire, you’ll want to have a nest egg to use for you and your family. After all, according to a PwC report, one in four Americans have no retirement savings, and you don't want to be one of them.[3]

Investing is one of the best ways to grow your money over time. And no, you don’t need to try and find the next GameStop, AMC or other stock that shoots to the moon. Here are some safer bets:

  • Index and mutual funds give you exposure to a wide variety of companies and markets. If you do invest in individual stocks, ones that offer dividends will provide you with extra money on a monthly or quarterly basis, which you can either keep or reinvest back into the stock.
  • 401Ks can help you set up for retirement. Many companies offer matching on a 401(k) account. Contribute as much as you can to receive the full match, which is like getting free money.
  • Roth or traditional IRA are another retirement account option. A traditional IRA lets you put pre-tax money (often directly from your paycheck) into a retirement account. A Roth IRA allows you to contribute after-tax money, meaning it’ll be tax-free when you start withdrawing years down the line.

Remember, no investment is without risk (outside of a retirement or savings account at an FDIC-insured bank or U.S. Treasury bonds), so don’t invest more than you can afford to lose. 

If you’re feeling creative, you could try these unique side hustle ideas, too. Put everything you earn from them in a high-yield savings account, index fund or retirement account and you’ll be on your way to long-term growth.

Step 4: Make your savings automatic

Trying to determine how much to save every month is stressful, so borrow the old phrase of “out of sight, out of mind” with your savings (though definitely still regularly check-in). 

Most employers will let you divide your paycheck to send certain amounts of money toward specific accounts. Open up a high-yield savings account that’s strictly for longterm savings or a nest egg and set up automatic investments every month, either from your paycheck or from another account.   

As a bonus, put some of your savings — or a financial windfall — into an emergency fund. It’s helpful both for paying down debt and for any major unexpected expenses that come your way, like car repairs or fixing your home after a weather disaster. Most financial experts recommend working to get at least three to six months of expenses into an emergency fund.

Step 5: Shop insurance and mortgage rates

Before you make any major car-buying decisions, compare insurance rates side-by-side to ensure you’re getting the best deal available. It’s a good idea to insurance shop every six months. Depending on where you live and how frequently you drive, a telematics policy could be the best option for you, saving you hundreds of dollars throughout the year.  

With a new home, work with a lender to make sure you understand all your available mortgage options and what that process looks like. There are fixed-rate mortgages (usually between 15 and 30 years) and adjustable-rate mortgages (ARMs). The right one for you depends on a number of factors, from your available savings to your preference for stable versus unstable (though potentially lower) monthly payments.

This applies to if you currently own a home, too. The low interest rate of the housing market makes refinancing an intriguing option, but be sure you understand everything that goes into a home refinance before making a decision. 



The journey of 1,000 miles begins with a single step. When you're deeply in debt, it can feel like you'll never get out from under it. By taking small, realistic steps toward your savings or debt-free goals, you can slowly start to see progress. Good luck!