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