The Five Foundations
By Hayli Herron
First Foundation: Save a $500 emergency fund
- Emergencies will happen along the way
- $500 now
- Car repair, cell phone
- $5,000 in the future (3-6 months expenses)
- Losing your job
- Keep this fund in a separate account
- So life events do not devastate you financially
The Second Foundation: Get Out of Debt
- Debt will seem like an easy answer when you don't have money to pay for things
- Delays problem and creates another
- By getting out of debt you can truly begin to save for things like:
- Car
- College
- Retirement
The Third Foundation: Pay Cash for Your Car
- Sinking fund, saving easier
- Save only a small amount each month for a few months to earn what you need
- (How much you want to save divided by how many months you will save will determine how much you need to save each month)
- Can use a sinking fund to save for a car
- You'll end up paying more than the original item you purchased when the interest increases the amount of debt you're in
The Fourth Foundation: Pay Cash for College
- Save money early
- Set aside each year in an account
- Apply for financial aid and scholarships
- Takes a long time to pay of student loan debt otherwise
- Hard to save when you have unpaid debt
The Fifth Foundation: Build Wealth and Give
- Change spending habits/use a budget
- By saving every year in another account to accumulate interest you will earn a lot after a few years
- Starting early is even better
- By the time you are older you will have a lot of money in the bank
- You can retire with all that you've earned
- Give back