Article

Build Your Financial Foundation

Successful money management requires regular reviews. Each year, you should pull all your records together and take a close look at your entire financial picture. Here are six steps that can help you put your financial affairs in order so that your financial foundation will be strong.

December 29, 2023
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

Successful money management requires ongoing reviews. Each year, you should pull all your records together and take a close look at your entire financial picture. Here are six steps that can help you put your financial affairs in order so you can build a strong foundation:

1. Analyze Your Cash Flow

In your budget, does your income equal or exceed the amount you put into savings and fixed or variable expenses? If it exceeds the amount, by how much? The amount of income that exceeds what you saved or spent is called positive cash flow. If your expenses exceed your income, you have negative cash flow. If your cash flow is negative, it may be time to reorganize and minimize any unnecessary expenses in your budget.

2. Provide Money for Special Goals

For every financial goal you establish, you need to address the projected cost, the amount of time until your goal is to be realized (time horizon), and your funding method (e.g., a scheduled savings plan, liquidating some assets, or taking a loan).

You should plan your goals on three tiers. On the first tier, you have an emergency fund of at least three months of income. On the second tier, you may have a special goal and may, for example, establish a savings plan for your children’s weddings or educational expenses. Finally, on the third tier are more flexible goals such as purchasing an automobile, renovating your house, and planning a vacation.

3. Enrich Your Retirement

Are you going to have enough money when you retire? Pensions and Social Security may not provide enough income to maintain your current lifestyle during your retirement years. Therefore, review your retirement needs and plan a disciplined savings program for your retirement.

4. Minimize Income Taxes

Many taxpayers reduce their taxes by taking advantage of tax deductions. Most are familiar with common deductions (e.g., mortgage interest, contributions to retirement plans, and donations to charities). In addition to tax deductions, however, there may be other ways of reducing your income tax bite. For example, under appropriate circumstances, losses or expenses from previous years may be carried over to the next tax year.

5. Manage Unexpected Risks

You are probably well aware that life sometimes throws us unexpected “curve balls”—that is, unforeseen risks. Suddenly and unexpectedly, your potential risk may become a financial loss (e.g., you become disabled without income or an untimely death causes financial hardship for your family). As a result, many have made insurance the cornerstone of their overall finances because it offers protection that can help cover unforeseen potential liabilities and risks.

These five steps will help you focus on the important issues that affect your finances. If you faithfully keep track of your progress in these important areas, you may be able to both afford your future and finance your dreams.

Other content you may like

  • The 8th Best August Stock Performance since 1926

    September 7, 2020
    This special report looks at the historical market returns in the context of presidential elections, which parties are in control of Congress, and various government election outcomes. While nobody can predict the future, and past results don't guarantee future outcomes, this report gives some insights as to what the financial landscape might look like after the 2020 elections.
    Read this Article
  • Investing in Your Vacation

    Investing in Your Vacation

    July 1, 2023
    Taking a vacation is an investment in your own well-being, in your career, and in the company you work for. Are vacations a priority to you or do you avoid this important investment? This article takes a look at some of the reasons for skipping vacations, as well as the benefit you might not have considered.
    Read this Article
  • 5 Battle-Tested Investing Tips & Wisdom

    July 1, 2025
    Soon we will celebrate our nation’s independence. It’s a good time to reflect on financial freedom and wisdom to help guide a lifetime of investing. Consider these tips on what not to do with your hard-earned money! These principles help guide long-term victory.
    Read this Article
  • Crafting a Rich Life in Retirement

    July 8, 2024
    To live a rich retirement life, begin with envisioning what brings you joy and fulfillment. From there you can use these strategies to maximize the assets you have. By focusing on what matters most to you, you can combine your financial goals with a plan that works to ensure that your retirement years are not just comfortable, but truly enriched with the beauty and depth of life’s experiences.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset