Whatβs the Most Important Part of Your Financial House?
Aug 12, 2020It’s a good question, because some people might say, “All the pieces of my financial plan are important.” That’s true! …But just as in building a house, the foundation is truly the first- and most critical- piece π‘
I’ve published recent articles about the different pieces of your financial plan, as well as information about having a good safety net. The original article about financial plans listed the pieces of your financial plan in roughly the right order, but let’s dive into that a bit more πβοΈ
The first step is to create a budget. You need to know how much you have, and where it’s all going, in order to figure out realistic goals. I hate to tell you, you are not going to retire a millionaire if you’re only saving $50 a month! But that would be a great start, if you’re saving $0 currently π€
After you’ve looked at your budget and created some realistic goals, you really need to start building your foundation. Or, if you’re a bit better established but you’ve examined your foundation and find it lacking… now is the time to shore that up π π
The foundation is all about protecting you, your family, and your assets. It honestly doesn’t matter how massive your assets are, if they will all crumble away in the face of the first little emergency, right? The most effective way you will protect yourself is to have the correct insurances. Bo-ring! But important, and once they are in place, you can set it and forget it π
The list can be daunting- health, life, auto, property, homeowner/renter’s, disability, long term care- but you can bundle several types of insurance/protection into one low payment. For example, property & casualty companies bundle fire, home/renter’s, and auto coverage. Even better, Living Benefits programs bundle together life, disability, and long term care coverage, and also help offset out-of-pocket healthcare expenses π€―π
Once you are protected against loss, the other part of your foundation is to plan for emergencies. A bit of an oxymoron, right? Emergencies happen because they’re unplanned! π
You can still take steps to diminish the financial impact of any given emergency by having an emergency fund. And no, that doesn’t mean to use your credit cards π³π¬
In the case of a minor emergency that’s still outside your monthly budget- the fridge leaks, a computer/smartphone gets fried, your kid accidentally backs the car into the garage- your emergency fund will solve these problems with a minimal amount of financial distress. Saving a few dollars a day will be well worth it to build that fund, so that you can fix a small problem, quickly, with zero stress π π
The easiest way to instantly have a cash reserve for major emergencies is, you guessed it, Living Benefits! They generally cost only a few dollars a day- for access to an enormous pile of tax-free money that would take you years to save up yourself- that can solve your biggest financial problems when they occur. Already have Living Benefits? You are super smart! π€
Take a few minutes to think about your financial foundation. Is there a part of this foundation that you avoid thinking about? That may indicate that you have some insecurity in that part of your foundation. Never fear, there are many professionals who can help you find an affordable way to create, build up, or improve that particular part of your foundation π©π§
Building or improving the foundation of your financial house is a vital piece of your financial health. A strong financial foundation will give you an enormous amount of peace of mind; when you know that you will be protected no matter what curveballs life throws at you, you’ll have the confidence to take the next steps to build your financial house and achieve your financial goals πΈ
Now That’s Smart Money π§
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