Finances & Money

4 Principles to Create a Solid Financial Foundation

When it comes to how we handle our finances, the numbers are staggering. The majority of Americans find it hard to scrounge up $1000 in an emergency. The statistics on saving for an emergency, saving for retirement, credit card debt and student loans show a trend of troubling personal finance stats. However, creating a solid financial foundation should not be hard.

It all begins with following a set of key principles that govern how you manage your personal finances over the long term. Here are a few things you should know in order to achieve financial success in your life.

Spend Less Than You Earn

This may sound obvious, but for many people, it’s harder than you actually think. Apart from taking advantage of discounts and cheaper purchases that only make a small dent in what you can save, the best way to spend less than you earn is to avoid unnecessary expenses. By focusing on increasing your earnings while managing your current expenses at the same level, you’ll easily increase the gap between how much you spend and your monthly income.

According to Dane County Credit Union, while there are always options to improve your financial status and well being, creating a strong financial foundation based on practical planning is the key to managing your personal finances. Reducing your day-to-day expenses offers you the potential to save significant sums of cash over time. Financial experts always say that, “If you can do without it, then don’t spend money on it.”

Maintain Some Form of Budgeting

Most of us can agree that sticking to a strict budget is not always easy. With so many financial needs, it can prove challenging to maintain a detailed itemized budget that details every major and small expense. A personal finance article on The Balance notes that Instead of focusing on every small detail that make it harder to manage your budget, focus on creating a big-picture budget that focuses on broad categories.

For instance, you could create a budget that outlines all housing costs and expenses. These could include your monthly rent, utilities, mortgage, home maintenance, furniture and anything else that’s house-related. Other budget categories could include all your transportation expenses, savings, debt payoffs and miscellaneous expenses. When combined, these categories may seem hard to manage, but they give you a broader picture of where your money is going.

Save for a Purpose

You should be saving at least 10% of your monthly income. The sooner you start saving, the less you’ll have to deal with financial stress when an emergency arises or during retirement. While people save for different reasons, it’s important to have a clear goal or purpose for the money you’re saving. You could save for an emergency fund, retirement, down payment for a house, vacation or luxury purchases, a new car, education or investment.

By learning to consistently save a specific amount of money and gradually increasing your savings, you can easily achieve financial stability. Saving takes discipline and sacrifice. A recent retirement savings survey shows that 33% of Americans have saved nothing for their retirement. While there are many obstacles to saving credit card debt, and expenses, starting to save, however little is the key to creating a savings culture that could change your financial outlook.

Pay Close Attention to Your Major Expense Categories

Simply spending less than you earn maintaining a budget and saving is not a direct ticket to financial stability. You need to pay closer attention to where most of your money goes. We spend most of our money in housing, transportation and food. If you’re spending heavily on other areas apart from these, you need to re-evaluate your financial spending.

If you can also reduce your housing, transport and food expenses, you’ll make massive strides in improving and strengthening your financial foundation. Pay attention for fees charged with various services including your investments as they could also be eating back at your savings and efforts made to improve your personal finances.


Sometimes, improving our finances simply takes a change in our lifestyles and how we handle our financial situation. Are you living beyond your means? Change that and start looking at your finances from a long-term viewpoint. Are you an impulse buyer? Start planning shopping trips ahead and leave credit cards at home. Are you dealing with debt? Consider debt consolidation options. Every small step taken towards improving your finances is key to making positive gains.


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Susan Paige

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