Financial Education school have Taught you (Part 3): Building a financial Foundation
This post is an excerpt from my YouTube episode "The Financial Foundation Magic" - you can watch the full episode with all the visual breakdowns and examples on my channel.
I keep hearing this same statement over and over: "I'll start saving more once I make some money" or "Let me put money in the market first, then I'll pay off debt once my 401k grows."
No, no, NO. You're already wrong on so much of this thinking, and it's eating at my soul because this is such FREE information that could change your entire financial future.
The Mountain Climber Who Can't See the Top
Picture this: You're climbing a mountain (your 401k), but there's thick fog at the top. You have no idea if you're 2 meters from the summit or 2,000 meters away. You don't know how much energy to spend, whether to take a break, or if you should push harder.
This is exactly how most people approach their finances.
They're throwing money into retirement accounts without knowing:
How much money they actually need
When they want to retire
What their monthly expenses will be
Let me break this down with real numbers. Say you determine you need $120k per year in retirement, you want to retire at 65, and you expect to live until 95. That's 30 years of retirement.
$120k × 30 years = $3.6 million you need saved up.
If you're 35 now, that's 30 years to save $3.6 million. Without any market growth, you'd need to save $120,000 per year. But here's the kicker - the maximum you can contribute to a 401k this year is only $23,500.
See the problem? You CANNOT reach your retirement goals with just a 401k. This is why planning matters.
The Three Money Management Skills You're Missing
Before you can even think about investing or growing wealth, you need to master these three foundations:
1. Money Planning
This isn't just budgeting - it's creating SMART financial goals. Your goals need to be:
Structured - Clear and organized
Measurable - Specific dollar amounts
Actionable - Concrete steps you can take
Results-focused - Tied to real outcomes
Timely - With clear deadlines
2. Money Organizing
Know where every dollar is going. If your monthly income is $11,000 and expenses are $6,000, you have $5,000 discretionary income. Over 30 years, that's $1.8 million flowing through your hands. What are you doing with it?
3. Money Tracking
Track your habits and patterns. Set monthly goals (like saving $250) and check them off. You need to see your progress visually to understand how you're really doing.
The Financial Foundation Pyramid (That Everyone Gets Backwards)
Here's the game-changer that most people completely miss. I learned this from the incredible book "Saving Your Future" by Jean Nguyen, and it's changed how I think about everything.
Most people try to build their financial house starting from the roof down. Here's the right order:
Foundation Level 1: Protection
Life insurance covering all your debt, 10-15 years of family income, mortgage/house money, children's education, and final expenses
Living benefits or long-term care protecting against illness and injury
High-yield savings accounts protecting against inflation
Tax-advantaged strategies protecting against taxes
Foundation Level 2: Debt Management
Focus intensely on eliminating debt, especially using interest cancellation strategies. Interest is eating your wealth alive.
Foundation Level 3: Emergency Fund
3-6 months of expenses in accounts that beat inflation. This protects you from going into debt or touching investments during emergencies.
Foundation Level 4: Investments
Only NOW do you focus on variable and indexed accounts for wealth building.
Why This Order Matters (And Why You're Probably Doing It Wrong)
If you have limited money each month, here's how to prioritize:
Let's say you have $250 discretionary income:
$150/month → Protection
$100/month → Debt management
$0 → Emergency fund (for now)
$0 → Investments (for now)
As your income grows, you add the emergency fund savings, THEN investments.
What most people do: They skip straight to investments, thinking market gains will solve everything. But what happens when the market crashes? When you get sick? When you lose your job? Your whole "strategy" crumbles because you built it upside down.
Stop Making Excuses and Start Taking Action
I'm tired of hearing "financial literacy isn't taught in school." So what? I'm teaching you right now.
You're responsible for your own financial future. If you don't understand something I mentioned, look it up. Research it. Learn it. Your future self is depending on the decisions you make today.
The foundation isn't sexy. Protection and debt payoff aren't as exciting as picking stocks or crypto trading. But you know what's exciting? Having a rock-solid financial foundation that can weather any storm life throws at you.
You have more money than you think - you just suck at money management. Once you fix that first boss level, then you can move on to actual wealth accumulation.
Your Next Steps
Calculate your real retirement needs (use investor.gov's retirement calculator)
Set up proper protection (life insurance, health coverage, emergency fund goals)
Create a debt elimination plan
THEN start thinking about investments
Remember: A strong financial foundation builds a sturdier, more enduring financial house. Without it, your financial future won't stand when the storms hit.
Want to dive deeper into these concepts with visual breakdowns and real examples? Watch the full episode on my YouTube channel where I walk through all the calculations and show you exactly how to build your financial foundation step by step.
Ready to get your financial foundation rock solid? All my planning services are completely free - just like this education. Use the links below to schedule time with me and my team.
