Do you want to be at the top of your financial game?
There are so many people who want to attain financial health but aren’t satisfied with where they are right now. According to a survey, only 29% of people feel they have strong personal finance. That leaves a big size of population in need of support as well as guidance on how to manage finances. So wondering how you can get things into a place when you’re empowered with your own money? Lets first begin with what things to focus on while building a financial foundation.
What is the key to building a Financial Foundation?
Building a financial foundation is a time-consuming process. Whenever you’re looking to build a strong financial foundation you should focus on taking care of your present while also focusing on your future goals. This means being responsible for your day to day purchasing habits while thinking of your long term goals too.
Building a strong financial foundation using 5 steps
Putting a plan for building a financial foundation is straightforward If you want to build your financial confidence and set yourself up for longer success – follow the below mentioned five-step method to help you get started.
Step no #1: Getting organized
The first thing that you need to take is to get crystal clear about where you currently stand with your finances. Yes! You might need to get documents ready, but this will be a one-time exercise that will provide you a deep insight into your current financial health.
Start with creating a personal balance sheet – which is simply a summary of your assets(things you own) and liabilities (things you owe). Assets include things like bank account balances, investments like home, jewelry, car(s), and more. Liabilities are the debts on you, such as car loans, personal loans, mortgage, student loans, and many more. Write down each asset and liability individually on a single paper sheet. This will be your personal balance sheet. Once you have the full data, you’ll be able to create your own net worth by adding up all the assets you own and subtracting your liabilities. Once you’re done with this, the next thing you should do is look at your monthly cash flow.
Finally, check your credit score. Also, you’re entitled by the government to a free copy of your credit report from the major credit bureau.
Step #2: Protect yourself
By following the above-mentioned step, you’ll know where you stand, after that it’s important to create a plan to keep yourself safe financially in your life-journey.
Emergency Fund: You need to create an emergency fund, which will come in handy during emergency situations like unexpected job loss or other financial crises.
Insurance Policies: You need to have different insurance policies, that will be crucial during different emergencies like medical emergencies, car accidents, and even death. Having an insurance policy will make sure that you’ll have financial stability during the above-mentioned emergencies.
Step #3: Define your financial goals
You have put the pieces in place to create your dream futures. So what do you want? Now is the time to think of your goals both short term and long term. According to https://fibyrei.com/personal-finance-101/, you should write your goals on a paper and ensure that your goals are specific, achievable, realistic, measurable, and time-bound. Are you ready to start brainstorming? Here are a few ideas that’ll help you get started:
- Create an emergency fund.
- Pay off your loan and high-interest credit card debt.
- Save money for your dream house down payment.
- Improve your credit score.
- Start learning how to invest with confidence.
- Create a vacation fund and budget.
- Look for a passive income source.
- Take retirement by age of 65.
Step #4: Make things happen
Once you have made your balance sheet and written down your goals, then start by identifying the areas of improvement in your current financial conditions, and what changes you can make to achieve your goals. Now is the time you should get started and start achieving the financial goals.
Pro Tip: Ensure that your goals are realistic and achievable so that you don’t overburden yourself by trying to achieve all of your goals at once.
Building a financial foundation takes a lot of effort and laser such as focus. But by following the above-mentioned process, you’ll start seeing real results with your money. Additionally, you’ll gain confidence in your ability to create a financially healthy lifestyle and stick to it.