Already have an emergency fund? If you have three months' worth of expenses saved up, consider boosting that to six months' worth. Set up automatic transfers from your checking to your savings account to build up your fund painlessly. Also, make sure bank fees aren't eating away at your stash. Online banks typically offer interest rates around 1% and no account minimums.
5. Protect what you've got
The role of insurance is to protect you against catastrophic losses. It's not meant to cover expenses you could easily pay out of pocket.
So ditch the cellphone insurance, and make sure you have the coverage that actually matters: renters insurance if you're renting (your landlord's policy doesn't cover your stuff), health insurance if you can possibly afford it (a high-deductible policy can get your premiums down), adequate liability coverage on your home and cars ($100,000 should be the minimum you buy; otherwise, buy an amount at least equal to your net worth).
If your employer offers long-term-disability insurance, sign up. If you have people who are financially dependent on you, such as minor children or a spouse who needs your income to pay the mortgage, you probably need life insurance as well.
All these policies can protect you or your family against financial disaster. If you're finding it tough to pay all the premiums, try increasing your deductibles on your property insurance to $500 or $1,000. Being willing to cover this much of any loss can lower your premiums by 20% or more.
Adequately covered? Boost your deductibles even higher, if you've got cash in savings to cover the bill in case you have to make a claim. And look into an umbrella insurance policy, which offers $1 million or more in liability protection. If you're a homeowner or have a teenage driver, this coverage can give you extra peace of mind for about $300 to $400 a year.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
VIDEO ON MSN MONEY
I only agree partially with this article. Personally, I think some of her ideas are a little backwards. If you want excellent financial advice read the books by Dave Ramsey, he is to the point and it works.
Firstly, to get financially fit you need to start with a monthly written budget and stick to it. That is KEY. Immediately build a small emergency fund, like $500 or $1000 depending on your income. This is important as you need some money for the broken furnace or car repairs that come up as you pay off debts.
Second, start the debt snowball... list out ALL your debts (medical bills, utility bills, parking tickets, credit cards, student loans, personal loans, etc) from smallest to largest. Whatever your budget allows, start paying off the smallest first and then work up to the largest (of course while paying monthly minimums along the way).
Third, finish emergency fund. After all debts are paid off (besides mortgage) build your savings fund with 3-6 months expenses.
Fourth, pay off your mortgage. Increase your monthly payments to as much as you can afford.
Fifth, invest your money for retirement. You can now do this vigorously as you now have no debts.
It may take a couple years if you are very strict with your finances but it is very achievable. Out of all the financial advice I have ever read, Dave Ramsey's books make the MOST sense. And he understands, he went bankrupt and rebuilt from nothing... this time making more sensible financial decisions.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters; click for restrictions. Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Telekurs.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.