3 actionable steps to improve your finances

Here are 3 actionable steps to improve your finances this festive season, including to start investing in shares.

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Most people in the country are having some time off right now and the New Year is the perfect time to start thinking about what you can do to improve your financial situation in 2020.

Financial 'resolutions' sound like something you might stop doing after a few weeks. The best financial changes are ones that are permanent.

That's why this December and January, these three things would be good ideas to do:

Research and negotiate the best deals

We all have bills to pay. But loyalty does not pay when it comes to many of your household expenses. You don't get any kudos for paying AGL Energy Ltd (ASX: AGL) or Origin Energy Ltd (ASX: ORG) more than you need to. Shopping around, or even just going onto the newest version of your plan, could make a difference on your energy bills.

Have you tried looking at the Aldi brand, or Coles Group Limited (ASX: COL) or Woolworths Group Ltd (ASX: WOW) store brand products in a taste test where you don't know which is which? You may find some non-branded products are the same or better, so you could save a bit of money each week on your cereal, meat or milk.

If you own a home your biggest monthly bill is probably your mortgage. Interest rates have been pushed very low by the RBA, so if you home loan interest rate doesn't start with a 3% (or lower) then it's at least worthwhile talking to a mortgage broker who works with plenty of financial institutions – not just the big four of Commonwealth Bank of Australia (ASX: CBA) and others – to see if you can knock off thousands of dollars from the overall lifetime cost of the loan.

Pay off your debt

There's a reason why CBA, National Australia Bank Ltd (ASX: NAB) Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) make billions of dollars of profit each year. Loans are big business!

Our finances are one of the biggest elements of our life and debt like credit cards or personal loans are big negatives because of the interest charged. Compound interest can work against you as well as working for you.

Paying off debt can help your finances and your stress. Being debt free is great for letting you sleep easily at night. 

Make sure you're paying at least the minimum repayments for all your debts. Then you either pay off the one with the highest interest rate first, or you pay off the one with the smallest balance first. And go from there to the next balance like a debt snowball.   

Start investing

After you've paid off most of your debt – you may decide that your long-term low interest debt doesn't need paying off ASAP, that's up to you – you should start investing.

Investing is the best way to grow your wealth for the long-term. Where should you start investing? Well, that's what this website is all about.

Many people just go for a simple investment to start with like an exchange-traded fund (ETF) that invests in hundreds of businesses on the share market. You could invest in an ASX ETF like Vanguard Australian Share ETF (ASX: VAS) or a US-focused ETF like iShares S&P 500 ETF (ASX: IVV).

Shares have returned an average of 10% per annum for many decades, so the returns will hopefully remain attractive for the rest of our lifetimes.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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