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The Foundation Phase

Life. It’s complicated enough as it is. You work hard to pay your bills, take care of your family, and build a bright future.

But in the back of your mind, you may feel like certain details of your financial life are falling through the cracks. How could this be? What should you do about it?

You know that you should be planning your financial future, investing for retirement, customizing your estate plan, and putting in place proper insurance policies. The list goes on and on. It’s difficult to know where to start!

What if there was a step-by-step system for enhancing your financial health? Thankfully, there is.

At Strategic Income Group our financial advice hinges on the Three Phases of Wealth. Each phase contains steps structured to have you complete critical financial goals in the appropriate order.

The order in which you complete your financial goals matters – it matters a whole lot!

When you’re building a house, you’re surely not going to hang the family pictures before you put up the walls. Similarly, you’re not going to put up the walls before you build a foundation.

In the same way, there are no shortcuts to achieving a stable financial future. In the real world, you have to accomplish goals one at a time – not to mention in the right timing.

The first phase – the Foundation Phase – is designed to help you lay the groundwork for your financial future. These “first steps” will help you protect your current lifestyle while opening your eyes to the lifestyle you can actually afford.

Here’s a flyover of the Foundation Phase with its prioritized steps . . . .


Step 1: Create a Budget and Save $1,000 Cash

Create a realistic budget that you will actually implement. Understand that it will take time to make a budget that works month to month, and don’t become discouraged when you can’t get it right the first time around. Just make a budget!

In addition, be sure to save up $1,000 in cash. Should you have a small emergency, $1,000 is typically enough to cover the expense. Later, you’ll grow your emergency fund to three to six months of living expenses.

It’s important to take actual cash out of the bank for this step. Keep it in a safe place at your house and pledge to only touch it when emergencies strike.

Need help starting a budget? Seek the services of one of our excellent financial planners.


Step 2: Get Appropriate Insurance Policies

Insurance is designed to help you pay for expenses that you can’t afford. It protects you and your family from emergencies larger than your emergency fund. In addition, it can protect your future income.

Some types of insurance policies you may need include:

  • Homeowners/Renters
  • Auto
  • Life
  • Health
  • Disability
  • Umbrella

Need insurance? Let us help you get the insurance appropriate for you and your family.


Step 3: Personalize Your Estate Plan

Don’t die without a living trust. The last thing you want is for the state to decide where your assets go and when, who will have custody over your minor children, and whether your estate will be made public.

Also, get a living will. A living will can make your desires known regarding difficult medical situations in which you may not be able to express your wishes.

These documents are not just for the wealthy. They’re for everyone!

Don’t have a living trust or living will yet? Let us help you get an estate plan in place.


Step 4: Pay Off All Consumer Debt

Now it’s time to pay off all your personal debt – with the exception of any mortgages you might hold. This includes all credit card debt, auto loans, school loans, personal and family loans, and any other non-mortgage debts.

You may be wondering why you shouldn’t just go ahead and start paying off your mortgage at this point. That’s a great question!

There are really two reasons. First, the next step in the Foundation Phase has you save the full amount you need in your emergency fund – a critical piece to ensure financial stability. Second, despite what you may have heard, it may not be advantageous to pay off your mortgage early.

You read that right! There are some situations where you should hold onto your mortgage. To illustrate this, check out our adapted story: The Tale of Two Couples.

You can use the debt snowball method to pay down your debt and experience some quick wins.

Be sure to avoid adding debt to your financial life going forward. You don’t want to undo all the hard work of paying off debt you’ve accomplished!

Stuck in debt? Seek the advice of one of our excellent financial planners and find a way out.


Step 5: Save 3 to 6 Months of Expenses in an Emergency Fund

No job is completely safe. Good health is temporary. Emergencies happen!

Having three to six months of living expenses in an emergency fund will come in handy when the inevitable hits. Emergencies are more of a question of when, not if.

If you live in a two-income household where each spouse works for a different employer, both incomes are similar, and both you and your spouse work for companies owned by other people, save three months of living expenses. Otherwise, save six months of living expenses in an emergency fund.

Make sure you save your money in a liquid savings account. Don’t get fancy with the money you have here. If you don’t have easy access to your emergency fund (like in the case of storing it in a CD, for example), the emergency fund might not be able to serve its purpose during an emergency.

Unique situation? Find out what our top-notch financial planners recommend you save.

Final Thoughts

Perhaps you’ve already completed some of the steps in the Foundation Phase. That’s fantastic! Focus on the steps you haven’t completed working your way down the prioritized list.

After you’ve completed all five steps in the Foundation Phase, it’s time to move on to the Accumulating Wealth Phase – the second of the three phrases in your new financial plan.