While sitting here on my work computer, it hit me like a brick to the head. People need to understand the importance of their financial foundation, but me saying it a million times isn’t going to do much. How can I get the point across where people can understand and have their “Ah ha!” moment.
Let me paint a picture for you:
Your financial plan for life is like building a house and the most important part of the house is the foundation. If you have a weak foundation, or if you have issues with your foundation, your entire house is going to collapse. All those rooms of goals & dreams you have will collapse with it.
A good financial plan foundation is the money you live by. You want to see what your current situation is with income, bills, savings and any debts such as credit cards or loans. Then you want to take a look at what protections do you have for yourself to make sure you can consistently pay the bills. What emergency fund do you have in place for the short term and for the long term what kind of insurance do you have? Most people don’t realize that their most important asset is their income and that there is disability insurance out there to help keep the cash flow coming when you become disabled to help pay the bills.
The biggest dangers I’ve seen that corrupt a good foundation are debts, lack of disability insurance, and an insufficient emergency savings plan. Of the 3 the biggest monster in the room can be debt. Here’s the thing about debt, it’s like a bug. Some bugs are good such as spiders, and some are bad such as termites. And as strange as it might sound, some debt is “good” debt when you’re thinking about your credit score. Too much debt or the wrong kind of debt is really bad for your foundation. Credit cards can be convenient but not keeping them inline makes it a huge issue for now and down the road. They’re your termites, slowly, quietly eating away at your foundation. Disability insurance is an easy one to fix by purchasing it like home insurance (typically a different agent though). Emergency savings plan is dependent upon different aspects of your life. Based off your income and expenses as well as what insurance you currently have will dictate how big it is and for what length of time is it set aside for.
Once your foundation is set you can start building your house of dreams. Each goal creates a room and as you build your home you’re going to find that you’re going to be changing priorities and goals around like you would in any home. Your plan will constantly be changing to your life, but once all is said and done you’ll be leaving a great legacy for your family or charity that you want to leave it to.
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