Building a Solid Financial Foundation
- Alex Potter, CFP®
- Sep 2
- 2 min read
Updated: Nov 3
A strong financial plan starts with the basics. Think of it like building a house. Without a solid foundation, everything above it is at risk. Before focusing on investments or retirement, it's important to secure your base. Cash reserves, debt management, and smart spending habits are the foundation. These fundamentals create confidence and flexibility no matter what life brings.
Emergency Fund
Targeting three to six months worth of living expenses is a great place to start. Simply review your monthly spending and multiply by three. For example, if you spend $4,000 per month, aim to keep at least $12,000 in reserves. If you're saving an extra $1,000 each month, you'll reach that goal in just one year. Setting a goal and working toward it is far better than being caught unprepared and relying on credit cards in an emergency.
Manage Debt Wisely
Dave Ramsey's Debt Snowball strategy is a time-tested approach to eliminating debt. Start by making a list of all your debts from smallest to largest balance. Focus all of your extra payments on the smallest debt while continuing minimum payments on the others. Once the smallest debt is gone, roll that payment into the next smallest debt. Each win builds momentum, creating a 'snowball effect' that motivates you to achieve freedom from debt.
Know Your Cash Flow
Track your monthly expenses with a simple Excel sheet or with budget tracking apps. Take time to review subscription services and cut any costs that aren't adding true value. Even small adjustments can create extra savings toward your long-term goals.
Action Step for September: Choose One Step to Strengthen Your Foundation
Review your emergency fund
Make an extra payment toward your smallest debt
Spend 10 to 15 minutes reviewing your monthly expenses
Strong financial foundations aren't glamorous, but they are the necessary component to solidify your financial future. Take initiative and see how giving attention to your financial health can help!
Quote of the Month
"Do not save what is left after spending, but spend what is left after saving."
-Warren Buffet
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. This communication is strictly intended for individuals residing in the states of MI, IN, OH. Cambridge and Foundation Wealth Management are not affiliated.
