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

  • Know your Risk Tolerance number.

    Tired of Tossing and Turning?

    August 4, 2023
    Know your Risk Tolerance number, a quantitative way to understand your risk tolerance that can help guide your investment decisions and help you sleep more soundly at night.
    Read this Article
  • May Student of the Market

    May 27, 2025
    In 2025, diversification helps with stock market volatility, and April saw the volatility index rise to its highest point since the pandemic. We also look at alternative strategies, bond performance, and scenarios surrounding interest rate cuts later in the year.
    Read this Article
  • Budget Tools

    6 Ways a Budget Can Help You Gain Control

    March 6, 2023
    Does the “Case of the Missing Money” sound like a popular mystery in your household? So often small purchases add up into bigger chunks of money that seem to disappear without an explanation. There is a way to gain more control of your personal finances. With these 6 simple action points you can get a handle on your income and expenses, so that you can build your savings and prepare for unexpected emergencies or large purchases or even a recession.
    Read this Article
  • Focusing on Your Finances

    Focusing on Your Finances

    March 16, 2021
    Each year, strive to increase your net worth and keep your expenditures under control. This article gives you a couple of easy to create budget tools that demonstrate where you are today and can help you make important financial comparisons in the future.
    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