Must Haves for a Strong Financial Foundation
July 12, 2022
Keep dreaming the dream! While becoming financially independent may seem overwhelming and hard to reach, creating a strong financial foundation is the first step on the path of independence. It’s not as complex as you might think!
As a general guideline, the journey to becoming independent from financial burden and the freedom it brings stems from creating a surplus between your income and expenses. There are many ways to do this, but there are a few building blocks that allow for the ability to have more income than you spend. You can get started with these first steps:
Before you set off on your track to financial independence, you need to know what you’re aiming for. Set your financial goals and categorize them as short, mid, or long-term. Whether it’s saving for a vacation, college education, or the end goal of retirement, every goal should be given a dollar amount and a target date.
Assess your current financial situation by listing all income sources and expenses. Use utility bills, bank statements, and credit card bills to make sure you’re accounting for all charges and debits, including cash withdrawals. Also, evaluate your discretionary spending and identify what you can tighten up or do without.
Set aside money in an emergency fund that can cover up to three months of all expenses. If you don’t have the funds, earmark income each month in your budget to get one going. Having an emergency fund allows a safety net in the event a financial emergency arises (such as a job loss, home or vehicle repair, health-related expense).
Pay Down Debt
Review your current debt to determine what debt needs to be eliminated, start with the highest interest rates first. The goal is to be very intentional about the debt you hold, avoid overspending or living outside your means, and never undertake debt you can’t afford.
Taking a deep dive into these financial areas can be sobering, but uncovering spending leaks or bad habits is what will allow you to make adjustments and start creating the financial surplus that can lead to wealth in the end. It can also loosen up funds to pay for emergency expenses or pay off any high-interest debt that may be impeding your financial goals.
Whether this is your first time working through this process or you’re simply reassessing your current financial situation, having a sound foundation is an essential part of becoming financially independent. It’s always a work in progress! Let us know if you’d like to discuss this further or need recommendations. We're just a phone call away!
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by Advisor Group to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 Advisor Group.