Building A Financial Foundation 101

In this episode, I break down the key areas of building a financial foundation. When I first became a life insurance agent, I found that many of my clients, were lacking a solid financial foundation. Having a foundation is essential in all areas of your life, and is crucial with finances. With 69% of Americans having less than $1000 saved for an emergency, now more than ever talks about creating a financial foundation is vital. 

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Hello, hello, hello, everyone. Welcome to Wealth Talks, a podcast for single moms by single mom. It's your girl Sam here, and I'm super excited for this episode. This is episode three, and in this episode, I will be breaking down what you need to build your financial foundation. And as some of you may know, um, when I became a life insurance agent uh back in May of 2021, I um noticed that a lot of families and individuals I worked with, while they were like, yay, I'm gonna get life insurance, there were other areas of financial planning that they needed assistance with. You see, life insurance is one area, the 26 areas of financial planning. There's so much to financial planning that many people um aren't aware of. And when I was working with with clients, I was noticing that you know they didn't have savings, they weren't budgeting, um, their credit scores wasn't great, and I was like, hey, we need to do something about this. And while I have knowledge just because of you know my job title of operations, watching the finances of the company, as well as being a single mom and running my own household, I knew that I needed more to help more people. So I enrolled in um Boss University becoming to become a certified financial planner. So I'm actually studying right now, but even while I'm studying, I can still help people, which led me to focus more on why I get people signed up for life insurance. I also help them with building their financial foundation. So let's dive in. So the financial foundation, uh, the first key component of it is your budgeting. You see, um, budgeting oftentimes gets a bad rap. Most people feel like a budget is restricted, it won't let them, you know, live their life. But let me tell you something, honey. A budget is one of your best friends. Budgets help you to thrive. There's no company on earth, um, no successful company on earth that is, that doesn't have a budget, that doesn't have checks, uh, assets, and liabilities, a balance sheet, doesn't know what's coming in and what's going out. And I always tell people, um, you have to run your household as if it's a business. You have to know what's coming in, you have to know what's going out. That's the only way that you're gonna stay afloat and stay on top. And the budget helps you do it. A budget keeps you in mind. Um, it it the way it works is that you are honest with yourself, you know, and you're not guessing, you're not guessing. You know exactly what's coming in at the taxes, and you know exactly what's going out. You know all your bills that you have, you have them written down, you have the amounts there. You you break it up into two categories. You have your fixed expenses and you have discretionary spending, and you you have a pretty idea of what those two entail. And then what you do is after you write the amounts down for each each um month, you could do it monthly, quarterly, however you like to do it. The trick is you gotta go back and you gotta go over that budget, you gotta look and see did you really just spend 200 on Ubi Eats, or did you spend 300? You know, did you really watch what you ordered when you went to um for lunch at work, or did you bring bring your lunch from home? So these are the things that the budget requires you to do. It requires you to write everything down to get exact figures and then to go back and go over it. And at first, it may seem a tad bit tedious, but as you get into the flow of it, it becomes a natural thing for you. You you start to understand what you're spending your money on. Are you over your are you over here? Are you over there? Are you are you on the same page as what you wrote down? And then um what that does is that sets the tone for your for your other areas of financial planning. So once you have your budget figured out, once you know what it costs or what it takes to run your household, then you could break down how you are going to formulate your reserves, and that comes into savings. So I'm a big pusher of savings, saving is so important, and I feel like in our society right now, saving doesn't get any light that it should get on. It's more about spin, spin, spin, spin, spin. We are like consumer mind driven where all we want to do is spend money, spend money. And I speak from personal experience because I used to be like that. I would save my money and then I would also spend my money. And then I have one of my clients tell me, honey, you don't have to spend, you don't have to spend everything you get in. You can add more money to your savings, and it totally changed my mindset because I was like, Oh, I'm gonna just send 10%, save 10% of my income, and then I can spend the rest. No, that is another recipe for disaster. Yeah, you save 10% of your income, and then you have extra money left over, you throw it into your savings account. And I'm not saying that to say you can't enjoy life and you can disperge and you can't treat yourself, but I'm saying that you don't always have to spend your money, you can put it away and you can save it. And while you're saving it, you you are learning, just you you're becoming more disciplined. And and one thing that I do want to say is when you're saving that money, don't put it in your regular bank account, put it in a high yield saves account. And let's break down high yield saves account for just a little bit because I feel like it's super important. High yield saves account allow your allows allows your money to grow, you know, without the risk. Without the risk. The traditional saves account, and um you might ask, well, why high yield and not my my Chase bank account or my capital? Oh, Capital One does have high yield, but why not my Chase or my Wells Fargo? Because those accounts give you 0.01, 0.02% interest rate on the money you have saved, which technically means you're losing money. And I know you're probably wondering how you lose the money in a savings account because money is a depreciating asset, if it just sits there and doesn't grow, it's actually losing its value. Think about a dollar. When I was young, my dad used to give me a dollar every day to go after school. I was like the baddest girl on the block because I had a dollar. I can get a bag of chips, I can get a quart of water, I can get some blow pops, I get some laffy taffies, I used to hook it up, some nile it is, everything. Nowadays, you have a dollar, you barely can get a bag of chips if you go to the store. So you gotta look at it like that. So when you take your money and you put it in something called a high yield saves account, not only is your money safe because you're not really, it's not really risk to it, your money stays there, your money is also growing a little bit faster than the traditional banks. Um, the the APR, the the rate, the yield rate for a high yield saves account, it fluctuates, you know, based on what's going on in the economy, but you are getting a better return than in your traditional bank. Because when we're building this financial foundation, we want to understand that we want to make our money grow, we want to make our money work for us, and we do that through a vehicle as a vehicle called high yield saves account. Now, of course, once we hit our sweet spot, which is you should have three to six months reserves in your savings account and your um for emergencies, then you can find other vehicles to make your money grow a little bit faster. Those vehicles may have a little bit more of a risk, but your money does grow a little bit faster. But that's a different show for a different day at a different time. So the next part of your financial foundation that you would like to work on is going to be your um your credit. Now, credit is super, super important, and I feel credit, I feel like there's not enough credit education going around. There are a lot of credit repairs, and no knock off to anyone that's a credit repair person because your services are very much needed when you get to a certain level. But I do feel like we need to focus more on credit education, credit coaching, teaching people how to maintain a credit score, how to keep your skirt card healthy, and how to keep it at a high rate. So you want to aim for your credit score to be 700 or more, 720 is really good, and then anything higher than that is really, really excellent. Um, most people, like when you go in for a home, they say you need 640, you need 680, car 640, 680. Yeah, that's true, but you have to understand that the higher your credit score is, the lower your interest rate you you you um you get from your lender. Your lender sees you as less of a risk. You always want to look at it like I don't want to give away any free money. And when you have a lower credit score and you go for a loan, whether it be a car or a home or any type of loan, they it costs you a little bit more money. So you want to understand that higher credit score, less interest, more money in your pocket. Because, hey, we're building wealth here, we don't have time to give it away to different kinds of people. So, two things I want to focus on when it comes to credit that I feel like there's a high miscommunication within our community. The first thing is your utilization. So, for years I always said, Oh, I kept my utilization under 30%. Um, my why is my credit score not going? Because my credit score was stagnant at the moment, and then I learned about the 10%. So you want to keep your credit score underneath 10%. I'm sorry, you want to keep your credit utilization underneath 10%. And while 30% they say is good, 10% is what actually impacts your score. Keeping it under 10% keeps your score a little bit higher. And like I said, we want those high credit scores so that we could pay less in interest rates. So that's the first one that we have that I wanted to address. The second one is you need to be constantly checking your credit report, not checking it every day, but you should check it quarterly. And I'm gonna tell you why. There is so much hacking going on, there's so much identity theft going on. You do not want to be a victim of that, and the way you combat that is you do prevention, you're constantly checking and monitoring your credit score. You make sure there's no smoke, those little credit cards that are open under your name that you didn't open. You want to keep that, keep that credit score up to date. You want to keep checking in it, and if anything looks out of the ordinary suspicious, you want to tackle it as soon as possible. So that's why credit education is important because how credit repair companies work is they try to remove things of your account that's that's not supposed to be there, they try to fight and dispute different um late payments or charges. So you want to make sure that you're on top of it, you're watching your listation, you're paying your bills on time, you're not letting any bad derogatory marks go into your credit report. And then the last part of a financial foundation is your risk management. And when I say risk management, I'm speaking about all your insurances that help protect your ability to make more money, and that's essentially what insurance is. Insurance is a placement value to be in the place of something so that it can make it can generate more assets when you make more money. So you have your disability insurance that helps protect your income while you're living. Then you have your life insurance that helps protect your income when you're no longer here, and if you play it right, you can have your life insurance um live and benefit, help produce more assets, but we'll go into that later. And then lastly, you have your long-term care insurance, which helps protect your assets from being depleted in case you need additional care. Well, not additional, but in case you need that one-on-one individual care when you get older and you're not as healthy as you need to be. So these three insurances are very important and they're um they help secure your financial foundation. So just to recap, we have the budgeting, which helps guide us, we have the savings, which helps keep us um safe, um, helps save us in case anything were to happen. We have the credit, which helps us to um to pay less at interest rates, and to if you do it right, you can leverage credit to buy more assets, and then you have your insurance products, which helps protect your income. So, if you would like to sign up for a one-on-one session with myself, I run a no fee based financial planning practice. My mission here is to educate and empower those within my community community on the benefits of financial planning. Um, I hope to see you for episode three and have a great day.