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By Brian Feroldi / The Motley Fool
September 25, 2015

While we Fools are passionate believers in investing in the stock market for the long term, we realize there’s far more to improving your financial future than simply picking the right stocks. We’re all firm believers that you need to get your financial house in order before you should commit any capital to the stock market.

We asked our team of Motley Fool contributors to share with readers one tip that they can use to bring order to their finances. Read on for their top ideas that you can use today to improve your financial future.

Todd Campbell: If you do one thing — just one thing — to help put your financial future on solid ground, make it ditching your debt.

Granted, debt can be valuable (and even necessary) when we’re getting our financial feet underneath us. It can allow us to get a car so we can get to work, to buy a house to raise our family, and to cover those inevitable unexpected expenses. However, far too many people rely on debt to buy things that aren’t necessary, or when they could buy them with cash, and that can lead to thousands of dollars (and sometimes tens of thousands of dollars) spent needlessly on interest over a lifetime.

According to the Federal Reserve, the average person with debt owes $15,706 on credit cards, and given that the average credit card variable interest rate is 5.72%, $2,469 in interest is piling up annually for the average Joe or Jane.

That’s a lot of money that would be better served being in your wallet, rather than your bank’s. Still not convinced? Consider that investing that $2,469 for 30 years at a hypothetical 6% annual return results in a portfolio valued at $195,200. Of course, tackling your debt will take time, but don’t be daunted. Begin by taking small steps to curb your credit card spending, such as relying more on cash, and to pay down existing balances, such as making an extra payment per year.

Brian Feroldi: A 2014 Brookings study found that 38 million U.S. households — one out of every three — lives hand-to-mouth, with little access to short-term funds. Even more telling is that over 66% of that group isn’t poor. Many of them earn good incomes and have assets — they just don’t keep their assets in liquid form.

That’s a mistake, as life is bound to throw you a financial curveball eventually. An easy way for this group to improve its financial future is to set aside an easily accessible emergency fund to help smooth out life’s financial bumps.

How much you should put into your emergency fund depends on a huge number of factors, such as your monthly living expenses, how safe your job is, how long it would take you to find a new one, and how many sources of income you have. I tend to be on the conservative side when it comes to finances, so I like to recommend keeping around six months’ worth of living expenses set aside.

I’ve followed this guideline for years, and while it can be frustrating to see the money just sitting there earning no interest, it helps me stay calm whenever we get blindsided with a big expense. In the past five years alone we’ve tapped our emergency fund to pay medical expenses, purchase a new furnace, cover moving costs, and replace a car. Thanks to a brutal winter, we’re probably going to be tapping it again to put a new roof on our house.

Whenever we draw it down to pay an expense, we always make it a priority to rebuild it as soon as possible, which really helps us sleep well at night. If you’re looking to improve your financial future, it’s hard to overstate the importance of quick access to a pile of cash.

Adam Galas: One of the most important things people can do to improve their financial future is to understand the difference between short-term speculation and long-term investing.

Many people, including several in my own family, are under the misconception that the stock market is a casino full of rampant speculators and gamblers. There’s a huge difference between the short-term gambling that Wall Street traders do and the kind of long-term, buy-and-hold investing that The Motley Fool recommends.

Speculation is gambling. It’s focused on short-term price movements that have little to do with the fundamentals of a business and is largely ruled by human emotions such as greed and fear.

On the other hand, long-term investing is focused on accumulating shares in solidly run companies with bright futures and cashing in on that growth, especially during times of immense market volatility. In other words, it’s a philosophy ruled by logic and discipline that avoids the pitfalls of negative emotions that studies have shown are a great way for investors to underperform the market over time.

Using myself as an example, I’m thrilled to be sitting at the crossroads of the oil crash and a market correction. I’m focusing my real-money portfolio on several oil stocks that are being hammered in the short term but in whose long-term business models and growth prospects I have strong confidence.

By dollar-cost averaging into this crash, I’m lowering my cost basis and probably earning a future yield on cost that will supercharge my returns once oil prices finally do recover.

George Budwell: Saving money for most of us has become an increasingly difficult task. After all, wages have stagnated over the past decade or so, yet the cost of living has continued to rise. So it’s not surprising to find that more than a third of Americans don’t have even a single penny saved for retirement.

What’s most interesting, though, is that this terrifying trend isn’t entirely the result of a lack of excess funds for saving. By contrast, I’ve discovered through my conversations with friends and family that it’s often about priorities.

Most of my friends, for instance, possess all the latest gadgets — smart TVs, the newest iPhone, PlayStation 4s, you name it. Even so, I don’t think a single one of them has a brokerage account, and their personal savings accounts probably wouldn’t carry them beyond a month in case disaster struck.

The way I’ve been able to avoid this pitfall is simple: I pay myself first. Before paying bills, going to fancy restaurants, buying toys, or whatever, I make sure to deduct 10% of every paycheck for personal savings.

And then that money goes into an account that’s not easily accessible. Knowing how easy it is to succumb to temptation, I’ve made it a point to keep this money at arm’s length. That way I won’t dip into my savings unless it’s absolutely necessary.

This simple strategy is a powerful method that’s proven to brighten the financial future of anyone who gives it a shot. So go ahead. Try it. You won’t be disappointed.

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