Less Than Half of Americans Took These Smart Money Steps Last Year

Americans are missing out on some key steps that could shore up their financial situation. Are you one of them?

What have you done in the past year to improve your financial situation?

If you're like most Americans, you didn't do enough. According to a recent survey conducted by Merrill Lynch, fewer than half of Americans took these three key steps toward firmer financial footing.

1. Improving your credit score

Your credit score affects many aspects of your financial life, including whether you'll have your pick of credit cards or lenders when you need a loan. A higher credit score gives you the best chance of getting approved to borrow at competitive rates or sign up for a credit card that offers generous rewards and perks.

However, despite the importance of good credit, just 45% of Americans took steps to improve their credit score in the past year, according to Merrill Lynch's survey. Steps to improve credit can include

• paying off debt to improve your credit utilization ratio,
• making sure to make payments on time, and
• checking your credit report to correct any mistakes that might affect your score. 

Unless you have perfect credit, it's worth making an effort to improve your score so you can borrow more easily and cheaply. This is especially beneficial when making big purchases, but an improved credit score can also help in other ways, including reducing premiums on your auto insurance or lowering the required deposit for utilities or a cell phone. 

2. Paying off credit card debt

Even fewer Americans took steps last year to pay off credit card debt -- just 43% of Americans worked on a debt payoff plan. Those who have credit card debt but aren't aggressively paying it off could be in trouble.

It can take decades to repay credit card debt when you make minimum payments. Working to become debt-free is important if you don't want to waste hundreds or thousands of dollars on interest.

Techniques for paying off credit card debt can include refinancing your debt with a lower-interest personal loan or using a balance transfer credit card to reduce the interest paid on your cards. Aim to make payments larger than the minimum so you can pay your balance off ASAP.

3. Saving up an emergency fund

Finally, Merrill Lynch's survey found that only 35% of Americans worked to save up an emergency fund with three to six months of living expenses. And with The Ascent's recent survey revealing that around 70% of Americans can't skip three paychecks without running into trouble, it's especially worrisome that most Americans aren't trying to rectify this.

Without an emergency fund to cover essential expenses, unexpected events can lead to financial disaster. A loss of a job or a serious illness, for example, can lead to damaged credit, eviction, foreclosure, or other consequences that can have a long-term impact on financial security.

Although saving up a large emergency fund may seem daunting, you need to have the money to deal with problems that arise. You can start small by saving just a little bit each month for emergencies and work on building up your larger emergency fund over time -- but you need to get started if you don't already have an emergency fund in place. 

You should take these smart money steps

Unless you have an emergency fund, no credit card debt, and a perfect credit score, you have some work to do toward improving your finances. Why not join the minority of Americans who put in the effort to improve their financial lives and make a plan to shore up your own finances over the coming year?