Sixty percent of individuals live paycheck to paycheck today, according to Lending Club. Financial illiteracy plays a large role in this problem, and people need to be educated on how to establish a solid financial foundation. When they have this information, they gain financial confidence. A person can build this foundation regardless of their age. They just need to know where to start.
What is a Strong Financial Foundation?
To have a strong financial foundation, a person needs a positive net worth. They must own more than they owe and have more coming in than going out. It begins with daily financial responsibility and planning. Save money, work on paying down debt, and determine net worth. These steps sound easy, but many people struggle, which is where help from 25 Financial comes into play.
Financial Planning
Every person needs a financial plan that outlines their goals and the steps to achieve them. Establish a budget that includes irregular spending and details the cash flow to find and eliminate unnecessary expenses. Set goals for the future and build an emergency fund. Next, focus on eliminating debt so that those funds can be invested. Investing at an early age leaves more time for the money to compound. Diversify the portfolio so that others can pick up the slack if one asset class declines in value.
Maximize Income
People need to maximize their income. Doing so may involve starting a side hustle or changing jobs. Another option is to negotiate a higher salary. At the same time, they need to spend less than they earn to build wealth. Put any additional money in investments and high-yield savings accounts. It takes time to build a nest egg, but any progress is good.
Protect Assets
Every person needs insurance to protect their assets. They’ve worked hard to build wealth and need to safeguard it. Insurance is one way to do so, but people also need to protect their personal information, as identity theft and fraud are increasingly common in the digital world. Create a will to ensure assets are correctly distributed following your death and pay off high-interest debt, as they reduce the amount that can be saved each month.
Track Finances
Most people don’t track their finances and wonder where their money goes. Writing down where every penny goes makes it easy to determine where cuts can be made. Furthermore, individuals should routinely monitor their credit reports to ensure there are no mistakes and that no one is taking credit in their name. Every person is entitled to one free credit report from each major credit reporting bureau yearly, and a person can now check their credit report weekly online. Finally, financial plans should be updated regularly, particularly when there is a major change in a person’s circumstances.
Seeking Outside Help
Individuals who aren’t financially literate should consider working with a professional to establish a strong financial foundation. This professional provides advice specific to the client’s situation. They offer options and allow the client to choose the one with which they are most comfortable. Find a financial professional with outstanding credentials and an established track record for peace of mind.
Establishing a solid financial foundation, saving money, and setting aside an emergency fund are three essential tasks that every person should focus on. Many people find doing so challenging, however. With the help of a financial advisor, this process becomes easier, so find this professional today.
