Phase 1: Build a Foundation For Success

Every strong financial plan begins with a solid foundation.

In this initial phase, our focus is on establishing the essential building blocks that will support your financial growth and future success. By gaining clarity on your financial goals and ensuring the basics are in place, you’ll be well-prepared to grow your wealth and achieve long-term prosperity.

Your dedicated advisor will help you create a stable financial foundation by focusing on key financial activities that ensure you’re starting from a position of strength. From budgeting to debt management and retirement planning, this phase is designed to give you the tools and confidence you need to accelerate your financial growth.

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Know Your 'Why'

Before diving into the details of financial planning, it’s crucial to understand the “why” behind your goals. Knowing your why is the foundation that guides every decision you make with your money. It’s not just about numbers; it’s about the purpose behind those numbers. Whether your goal is to achieve financial security, provide for your family, or retire comfortably, your 'why' is what keeps you focused and motivated.

Starting your financial planning journey with a clear understanding of not just what you want to accomplish, but WHY makes your financial plan more than just a strategy—it becomes a roadmap to a life that reflects your true priorities.

Example: Sarah wants to create a stable financial future for her family. Growing up, she experienced the stress of financial uncertainty and is determined to provide a different experience for her children. Her goal is to build a cushion of savings, so her family is always protected, and to save for her kids’ education, ensuring they have opportunities that she didn’t. This deep-seated desire to provide security and opportunity for her family drives every financial decision she makes—from budgeting and saving to investing for the long term.

Financial Planning Activities to Expect 

🎯 Creating (and Sticking to) a Budget 

The first step to financial stability is understanding where your money is going. We help you track all income and expenses, categorize your spending, and identify areas for potential savings all within RightCapital. When creating your budget, we recommend using the 50/30/20 method when evaluating your cash flow:

 At Advisor we advise using the 50/30/20 budgeting framework: 

🏡  50% on needs (mortgage, groceries, transportation, etc.)
🛍️  30% on discretionary spending (entertainment, shopping, etc.)
🏦  20% on savings

What is a savings rate? How can I figure out mine? 

Your savings rate is simply your total savings divided by your total income.  

RightCapital does this calculation for you! Navigate to the Retirement > Analysis > Savings section to see a full breakdown of your current and future savings, based on the plan your financial advisor has created for you and your inputs in your profile.

A 20% savings rate seems high, I am worried.

Remember, financial planning is a journey. Success will not happen overnight! 

If you have never budgeted before, reaching a 20% savings rate may seem overwhelming at first.  But each step you take in managing your cash flow is an important and incremental step towards achieving this financial milestone.  Your financial advisor is here to guide you through each step of the way. You CAN do this!

📉 Debt Management

We will help you prioritize the payment of your debts, focusing on high-interest debt first. By creating a pay down plan that prioritizes high-interest debts, you’ll reduce the amount of interest you pay over time and free up resources for other financial goals (like increasing your savings rate!).

📈 Retirement Contributions

If you have a retirement plan through your employer, such as a 401(k) or another sponsored retirement plan, it is important to contribute enough to receive the full employer match, typically around 5%. This not only helps boost your retirement savings (and savings rate!) but also allows you to take advantage of additional funds from your employer.

While we cannot manage your specific employer-sponsored plans, we can assist you in ensuring you have the most suitable allocation for your needs.

If you are self-employed or do not have access to an employer-sponsored plan, we will work with you to set up the right tax-advantaged retirement accounts that align with your individual financial goals.

💰Building an Emergency Fund

Life can be unpredictable, and having an emergency fund is essential for peace of mind. We recommend building a fund that covers 3-6 months of living expenses, with 5-10% of your savings directed toward this goal until it’s fully established. This fund acts as your financial safety net, ensuring you’re prepared for unexpected events like medical emergencies or job loss.

With a robust emergency fund in place, you can confidently embrace the investment strategy your advisor will design for you, knowing that you’re protected against unforeseen expenses and can stay focused on your long-term financial goals.

🏥 Establishing a Health Savings Account (HSA)

If you’re eligible for a High-Deductible Health Plan (HDHP), opening a Health Savings Account (HSA) is a smart move.

HSAs offer triple tax advantages: tax-free contributions, tax-free growth, and tax-free withdrawals when used for qualified medical expenses. Your HSA funds are yours forever, and can be used to cover qualified medical expenses now or in the future. 

Even if you begin with modest contributions, establishing an HSA is an important step in building your financial foundation. It not only helps cover healthcare costs but also serves as a versatile, tax-efficient investment vehicle for your future.

Goal Setting for the Future

In addition to establishing essential habits and accounts, this phase is also about setting clear financial goals. We work with you to identify:

• Short-term Goals (1-2 years): These might include saving for a vacation, building your emergency fund, or paying down debt.
• Medium-term Goals (3-5 years): This could involve saving for a down payment on a home, starting a business, or planning for a major life event.
• Long-term Goals (5+ years): Here, we focus on retirement planning, wealth building, and achieving financial independence.

We also help you define your desired retirement age and the type of retirement you envision, whether it’s semi-retirement, full retirement, or a lifestyle filled with travel and leisure.

Building a strong financial foundation is the first and most important step in your financial journey. By focusing on budgeting, debt management, retirement contributions, and goal setting, you’ll create a stable base that will support your future financial success.

➡️ Next Step - Phase 2: Grow Your Wealth

Additional Resources

Budgeting Overview

Why You Should Be Maxing Out Your 401k

Where Should My Next Dollar Go?