As we wind down the year, it’s a perfect time to lay the groundwork and build a strong financial foundation for healthy future. Many of us make resolutions to eat healthier, exercise more, or even pick up a new hobby, but creating a strong financial foundation can be just as transformative. In fact, a solid financial foundation provides so many benefits, such as: peace of mind, protects against unexpected expenses, and helps you reach your long-term goals.
If you just give buildling a financial foundation a chance, I promise, with just a little bit of work it will change your life! Yes, really, your life.
Without a solid foundation, you’ll end up with more stress, money disappearing, not near enough savings, inconsistent tithing, and the list goes on. If this is your “norm”, isn’t it time to try a different approach?
And if you already have a solid financial foundation, this is a great refresher for you as well! Things change, and every year is different.
Let’s get started. Here’s how to start fresh with actionable steps to build or reinforce your financial foundation.
Set Clear Financial Goals
Successful people in all walks of life will tell you that goal setting has been a driving force in their success. Dreams without goals, and the activity to accomplish them, are just lofty thinking and ideas and seldom get off the ground. Setting goals gives direction to your financial decisions and helps you stay motivated. Begin by listing your short-term and long-term financial goals. For example, maybe it’s saving for a vacation, building an emergency fund, or maximizing your retirement account contributions. Write them down and break each goal into manageable milestones to make tracking progress easier.
Tip: Use the SMART goal method—set goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. For example, “Save $5,000 in my emergency fund by the end of 2025 by setting aside $400 per month.”
Create a Spending Plan (aka Budget)
Budgeting isn’t about restriction; it’s about clarity and control. Once we can get past the mental blocks of the word budget and understand its value, we can potentially create a little enthusiasm around it. A spending plan allows you to understand where your money is going and make intentional choices – onces that align with your goals. To get started, list your essential expenses (like rent/mortgage, utilities, groceries) and discretionary expenses (like dining out, subscriptions). Then, allocate a portion of your income to each category based on your goals and priorities.
There are many different budgeting concepts. There is a zero based budget, which I like. There are 50/30/20 rules and 60/30/10 and all sort of combo’s such as that. What is most important is you find a method or practice that you are willing to stick with.
Tip: Consider using the 50/30/20 rule—50% for essentials, 30% for wants, and 20% for savings and debt repayment. However, feel free to adjust these percentages to fit your financial situation.
Know Your Numbers
Understanding your financial situation is essential to managing it effectively. You may be surprised to hear this, so many of my clients don’t know their total income. They know “about how much” they make, but they don’t know exactly what they make. Most people also don’t know what their total expenses are. It’s quite a challenge to create a financial plan if you don’t know what you are working with. To get started, gather and assess the following numbers:
- Income: Know your total monthly income from all sources.
- Total Expenses: Calculate your monthly expenses, including both fixed (like rent or mortgage) and variable (like entertainment) costs.
- Debt: List any debts you owe, including credit card balances, loans, and other liabilities.
Knowing these figures helps you get a clear picture of your financial standing and areas that may need improvement.
Track Your Money with a Weekly Money Date
Once you’ve created your spending plan, it’s crucial to track your progress. Schedule a “money date” each week to review your finances. During this time, check your bank statements, review recent purchases, and see if you’re sticking to your spending plan. A weekly check-in can help you spot spending trends and address any potential issues before they become problems.
Tip: Make this time enjoyable by pairing it with something you like, such as a favorite snack or coffee, to keep it stress-free and positive.
Build an Emergency Fund
An emergency fund is a financial safety net that helps protect against unexpected expenses, like car repairs, medical bills, or job loss. Ideally, aim to save at least 3-6 months of living expenses in a separate, easily accessible savings account. However, if saving that much feels overwhelming, start with a smaller goal—such as saving $1,000 for emergencies—and build from there.
Tip: Automate your savings by setting up a direct deposit or recurring transfer into your emergency fund each month. It makes saving easier and ensures you’re consistently contributing.
Find the Leaks
Most of us have small “leaks” in our budget—those seemingly minor expenses that add up over time. When reviewing your transactions over the past month, look for expenses that could be reduced or eliminated. Common leaks might include unused subscriptions, impulse purchases, or excessive dining out.
Tip: Set limits on certain expenses, like dining out, or challenge yourself to reduce specifi costs each month.
Locate and Assess Your Assets
Take stock of all your financial assets, including bank accounts, investments, retirement accounts, and any valuable property. Knowing where your money is allows you to assess your financial situation and make informed decisions about allocation and potential growth.
Tip: If you have multiple bank or investment accounts, consider consolidating them if possible. This can make tracking and managing your finances simpler.
Evaluate Investments and Savings Accounts
Regularly reviewing your investments and savings helps you understand how your money is growing and where adjustments might be beneficial. For example, check the rates of return on your savings and investment accounts. Are they performing as expected? Should you consider reallocating to higher-yield options?
Tip: Take a look at your 401(k) and review its performance over the past year. Make sure your contributions are sufficient, especially if there’s an employer match, and assess whether the investment mix aligns with your retirement goals.
Ensure Your 401(k) is Working for You
Your 401(k) is a valuable tool for retirement savings, especially if your employer offers matching contributions. To make the most of it, ensure you’re taking full advantage of any match (free money!). Review your investment options within the 401(k) to ensure they align with your risk tolerance and retirement timeline.
Tip: If you’re unsure about your 401(k) investments, consider speaking with a financial advisor who can guide you on how to optimize your retirement savings.
Ready to Build Your Financial Foundation?
Taking these steps can help you set up a strong financial foundation for the year ahead, creating security and peace of mind. Remember, building a financial foundation is a journey. Start with small, manageable steps, and make adjustments along the way. With consistency and intentionality, you’ll find yourself on a path to financial stability and growth.
Join Sisters in Success
If you’re ready to start the new year with a supportive community by your side, join Sisters in Success, our private Facebook group, where like-minded women share strategies and inspiration for financial empowerment.