Money Wise Mom

If you want to build an awesome life, you need to build an awesome house. Financially speaking.

Let’s think about your financial house from a bird’s eye view. Let’s fly way way way up and then turn to peer down at the ground. Can you see your house? I can. It’s a beautifully carved marble building on a lush field of green and yellow. It’s sturdy and strong and secure. It’s built to last the ages. And it’s based on four pillars.

The pillars of your financial house are:

1. A Spending Plan – Live within a spending plan that allocates a healthy balance of money for housing, transportation, life, future, and, if needed, debt busting.
   
2. Emergency Savings – A multi layer safety net to protect yourself from unforeseen events that risk bringing down your financial house.
   
3. Zero Debt – Debt is an anchor that drags you down. You need to bust all high interest consumer debt as quickly as you can. Save yourself!
   
4. Investments – Buy a diversified portfolio – as much as you can afford, every month, without fail, into boring stuff that has low management fees. We’ll talk about knowing what you can afford in a future post!

These four focus areas are your building blocks for financial security.

Zooming out paints the picture of what you want and creates the blueprint of what you need. With your blueprint in hand, your next steps will be to zoom in and start building from your plan. In future posts, I’ll help you construct each pillar, methodically and systematically.

But, for now, don’t over think it! Enjoy the view and know that once all these pieces are in place, you will have put your financial house in order.

As a closing thought, let me mention that, on top of our four pillars, stands financial independence (FI). People reach FI when their investments provide more income than their projected expenses. If they accomplish this surplus before the generally accepted age of retirement, they can retire early (RE). This is the basis for FIRE, an extreme personal finance movement, which marries FI with RE. Online discussions concerning FIRE include big feelings and heated debates. The great news is that you don’t need to choose right now if you want to pursue FIRE. By building your financial house based on the pillars I’ve listed above, you’ve created a foundation for FIRE, should you ever want to pursue it! The only difference is that you would adjust your spending plan to focus more on the future to make investing a priority over spending.