How to Increase Financial Stability for a Solid Financial Foundation

Hello, and welcome to today's episode on the Wealthy After 40 podcast. As promised, today's episode is about financial stability. how to create it, the necessary steps to build it, and what that truly means. So if this topic is of any interest to you and you're curious as to how budgeting also plays a part in this as well as the other financial freedom levels, join me for my free workshop, Financial Freedom Blueprint, the end of March, um, where we will cover all of those topics. How they work together and the action steps you need to do at the various levels and the various phases of budgeting. You can find the link for registration in the show notes below or also on my website at elevatefinances. us. Alright, so back to today's topic, financial stability. But before I dive into what that means, I want to talk about the opposite, which is financially fragile. It's Financially fragile means that an individual or household is lacking resources to cope with potential or unexpected expenses. So I want to pose this question to you. To have you kind of gauge where you feel your, you know, level of fragile or level of stability actually lies. The Global Financial Literacy Center posed this question in a survey, and their question was, how confident are you that you could come up with $2,000 in 30 days? The results of their, their surveyed. 51 percent said they could come up with that 2, 000. So now the National Endowment for Financial Education states 1 in 3 Americans are financially fragile. Again, that means they are not prepared to handle any level of emergency. I know it was posed somewhere, um, that most Households. So those that are financially fragile could not handle a 400 emergency expense. So as you reflect on that for yourself, just kind of think, where are you? How do you feel about both of those numbers? So 400, could you cover that? And then could you cover 2, 000? Now they're giving you a whole month to come up with that 2, 000. How does that make you feel? How do you, uh, respond to those types of situations and, you know, kind of experiencing those types of situations. So I was on a free call with an individual who was interested in working with me. He specifically was reaching out to me to help him pay down debt. And as we were discussing, and he was sharing, you know, this is what I struggle with, this is what I need help with, and I'm like, yep, yep, yep, nope, I can help you, no, my program covers that, you know, we talk about all of these things, and really was on a good track. Then, oh, before I, before I go on to that part, him and his wife made 250, 000 a year. So as we're talking through this. You know, and he's got a level of debt he is not comfortable with and he wants help paying it down. I share with him my cost, which was lower then than it is now. And literally was less than 1 percent of his annual income, and he freaked out. To me, that shows there is a level of, you know, no stability, financially fragile, could not even cover the, you know, the cost of a three month program to help him get in a better situation. Now, let me remind you, he made 250, 000 a year. So as I say that, do you think it is earning more money is going to solve your problem, or having a better plan will also be the better idea? Now, individuals who are very low, very low income, yes, it is about earning more income. So I'm not saying that this is for everybody. But at some level It's not about more money. You know, um, last time I talked about financial creep, where you spend what you make, and really being aware of your financial situation on all of the things that need to come together. So as we explore today and talk about stability, And we are moving on to that. Um, I want you to really think about how you can move ahead. If you are somebody who is not prepared for an emergency, um, what you can do with the steps I'm sharing today to help get you in a better situation. Last week I was in a money healing series presentation and if you are a member of my Facebook group or have been on any of my workshops, you may have heard me share or seen me share. My formula for budgeting. Income equals expenses. That is all a budget is. We only have so much income and we need to assign it an expense. Now you're probably thinking I'm crazy because I have not mentioned savings. But what if I shared with you that savings is only money set aside for a future expense? Even if we are creating generational wealth, That is intended to be spent at some time in the future. So I know a lot of people have issues with seeing a bucket of money there and thinking, ah, that's a really nice amount and I could go buy this with it. But if we think about the needs of the future, the needs of the unexpected, we're able to start building, uh, stability, right? Getting away from that fragile state of mind and that anything could happen could set us. So as you start thinking about building your stability, essentially you are building an emergency fund. I don't like Okay, so I'm going to share on my journey, as I was growing, as I was building my stability, they were like, you need an emergency fund. I'm like, okay. Like how much, like, what do I need to do? And, you know, the thing out there at that time was you need three to six months or six to 12 months of expenses in case of job loss. Well, I wasn't in a situation that, you know. 99 percent sure I would not lose my job. So I'm like, okay, but on the flip side of that as well, what about the other things that could happen? How am I preparing for those? Like, if I'm not expected, you know, to lose my job, and even if I am, I guess I should be prepared. I'm following you there. But what about If I need to have my roof repaired. What if my furnace goes out? What if I have a wreck or my car breaks down? How am I covering those emergencies? And so, on my own, but it is also out there now, so I love that other individuals have found it as well. I started creating little emergency funds. Little buckets of money that for me created defining moments of when I could touch that money, right? It's, it was stated already. You need this money in case your furnace goes out. All right. It's, you know, 10 years old, who knows when it's going to go out. So I better be prepared and thinking through all of those things that affected my life. If I go back to my early, early career, my husband and I, and this was back in the nineties, so yes, time was. Money was different. Situations were different, but we had a hundred percent medical coverage. So if somebody were to tell me I needed to save for medical expenses back in that day, I would have thought you were crazy, right? So it just shows that everybody's needs for, quote, emergencies are different. Another way to demonstrate that is If you are renting a home, you are not going to need to repair the roof, right, or the HVAC, or any of that. That does not rely on you. You have different emergency needs, um, different, you know, financial surprises that are going to show up. So as you start thinking about building your stability, you're going to explore your life. You're going to explore what could be your needs in the next 5 years, 10 years, 15 years. So that kind of gives you the groupings. I do my categories fairly broad. I have a home fund. It covers maintenance, repairs, um, if we were to do a remodel, you know, uh, furniture, new furniture, that type of thing. It is all lumped into that. Um, but it took me some time to get there. I had individual funds for a long time. So do what feels good for you. Okay, now you're thinking. But how do I get money in there? How do I create these funds, right? All right, so let's go back to level three. So stability is level four. Level three is breathing room. So as you get into breathing room, that means you have money left over. after every paycheck, right? You're not spending all you make. And I don't know why, but 50 kind of stands out to me, right? Like, Oh, you have 50 left over from that paycheck. That's really good. And over time that will grow, right? As your income increases. Um, as maybe some expenses change and that will, that will essentially grow. But even starting with 50, take a 50 and project into the next week or two into the next month or two. What can you see is coming up that is going to financially impact you? A lot of people, you know, their kids. It's time for them to start school and they're like, Ah, a thousand dollars to get them into school. Alright, that's what you paid last year. So, why did you not prepare for this future expense? That is ultimately the idea of building up this stability. Preparing for number one, first and foremost, those expenses that are going to happen, you know, in their various months, in their various quarters, they're not happening monthly, but they do happen. Birthdays, Christmas, car repairs, car registrations, right? Property taxes, if that's not in your mortgage. Or if you're renting, right? Insurance. If your car insurance is not monthly and it's more, you know, six months or annually, those are the things that you need to be setting money aside for because those are future expenses. We need to make sure we're ready for those to create that stability. So we start there. And then once you build that up and you're, you're pretty much prepared for all of the quote expected, all of the things that you can foresee, then you start building up, um, you know, for some of those areas like medical, we don't know what's going to happen to us one day. So I save my deductible, right? Once I reach my deductible, there's going to be an out of pocket. We know insurance is really just catastrophic coverage. So I figure if I have most of it, hospitals will take payments, right? Those types of things, I can figure it out that way. So thinking ahead, being prepared for those types of situations is very important. Now if you own a home and you've lived there, maybe you bought it new. You're coming up about 15 years. Between 15 and 20 years, things are going to start wearing out, need replacement, you know, need to be repaired, those types of things. I know, and you probably have heard too, there's a lot of individuals that are like, oh, I need a new roof. Well, yeah, after about 20, 30 years, you're going to need to replace your roof. And so they go to their insurance. Right? They pay their deductible, get their insurance to cover it. But all that does is increase your insurance. And so then you're still out that money. So why are you not planning and preparing for those situations? Being able to, you know, pay in cash is also huge. Um, I know individuals have gone to other departments and they get two years quote free interest, but they pay double what I did. You know, so in a sense, I don't think it was free. And so just trying to get you to explore all of those things. So as you get the breathing room and you move into, you know, building up your stability buckets, sinking funds, saving buckets, whatever you want to call, and then you start building up for those. goals and those dreams. What is it that you aspire? What is it that you want out of your money? Right? Are you vacationing once a year? Are you, um, wanting to, you know, support your kids in college? Whatever it may be. Preparing for those types of situations. And then also, um, the next level is flexibility. That's two years as he states. Two years of, um, expenses covered, right? So getting to that next growth phase, honestly, define that for yourself. What does flexibility mean? Does it mean that you've saved up enough that you can cut back or flexibility that you just know if something were to happen, you're ready to. You know, take care of it and take it on. But then the next level is a financial independence. So really you're going from financial stability to financial independence. As you build up those buckets and then, excuse me, and then as you move those buckets into your investments, into your retirement, right, that should be a bucket as well. That is going to be a future expense. Who's taking care of 80 year old you? Being able to prepare for that future expense. Again, we're going back to income equals expenses, and that expenses then gets defined out, defined out to all of the different areas. So, all right, you're thinking, where's this money coming from? Think about your monthly income. Think about your monthly bills. That is, you know, X number of dollars. Then think about your expenses. Which, um, you're spending, groceries, fuel, um, eating out, grabbing a coffee on your way to work, entertainment, that type of thing that you normally do, you regularly do, that, what is that total expense? And then, what is left over, because you've covered both of those buckets, what is left over becomes your, quote, breathing room to build your stability. So, as you're sitting there with this amount, and working with clients, um, Regardless of the income they make, we are finding anywhere between 20 to 25 percent quote left over. You will be finding the same thing. And then using that, you look at what is the, uh, future, um, closest in the future impact, financial impact you're going to have. So. So you're thinking this is the end of February. You look ahead to March. What is financially impacting you? Oh, spring break. Yep. We go on that weekend trip or, oh, my kids have that sports tournament and I need to be prepared for that. You're setting aside that quote, extra money to cover those immediate expenses. And then you slowly keep building that out into the next month, into the next month, because you're going to have some months where. You know, nothing really happens, right? It's a quiet month. Not a lot of those extra expenses, those financial surprises, whatever you're defining them as, but yet you, you need to be building that out in two months, hopefully you're, you can build that up to a year ahead, really focusing on gaining stability for yourself, for your family is number one key after, you know. After all the other levels, right? But this is where you're going to spend most of your time building that momentum, creating that momentum to then retire, to then have things paid off, you know, because even in that same bucket, you can create debt payoff. That is an expense, even if you hold it for a little bit and then you apply it, that is an expense as well. So being able to Create the flow, the momentum, that building up of stability to support you in your future is huge. All right, so that's all I have for you today. If you have any questions, please, um, either join us in the Facebook group on the discussion post for all of the questions and where we dive deeper into the specifics or hit me up on Instagram, send me a DM with your specific questions. Hello, and welcome to today's episode on the Wealthy After 40 podcast. As promised, today's episode is about financial stability. how to create it, the necessary steps to build it, and what that truly means. So if this topic is of any interest to you and you're curious as to how budgeting also plays a part in this as well as the other financial freedom levels, join me for my free workshop, Financial Freedom Blueprint, the end of March, um, where we will cover all of those topics. How they work together and the action steps you need to do at the various levels and the various phases of budgeting. You can find the link for registration in the show notes below or also on my website at elevatefinances. us. Alright, so back to today's topic, financial stability. But before I dive into what that means, I want to talk about the opposite, which is financially fragile. It's Financially fragile means that an individual or household is lacking resources to cope with potential or unexpected expenses. So I want to pose this question to you. To have you kind of gauge where you feel your, you know, level of fragile or level of stability actually lies. The Global Financial Literacy Center posed this question in a survey, and their question was, how confident are you that you could come up with $2,000 in 30 days? The results of their, their surveyed. 51 percent said they could come up with that 2, 000. So now the National Endowment for Financial Education states 1 in 3 Americans are financially fragile. Again, that means they are not prepared to handle any level of emergency. I know it was posed somewhere, um, that most Households. So those that are financially fragile could not handle a 400 emergency expense. So as you reflect on that for yourself, just kind of think, where are you? How do you feel about both of those numbers? So 400, could you cover that? And then could you cover 2, 000? Now they're giving you a whole month to come up with that 2, 000. How does that make you feel? How do you, uh, respond to those types of situations and, you know, kind of experiencing those types of situations. So I was on a free call with an individual who was interested in working with me. He specifically was reaching out to me to help him pay down debt. And as we were discussing, and he was sharing, you know, this is what I struggle with, this is what I need help with, and I'm like, yep, yep, yep, nope, I can help you, no, my program covers that, you know, we talk about all of these things, and really was on a good track. Then, oh, before I, before I go on to that part, him and his wife made 250, 000 a year. So as we're talking through this. You know, and he's got a level of debt he is not comfortable with and he wants help paying it down. I share with him my cost, which was lower then than it is now. And literally was less than 1 percent of his annual income, and he freaked out. To me, that shows there is a level of, you know, no stability, financially fragile, could not even cover the, you know, the cost of a three month program to help him get in a better situation. Now, let me remind you, he made 250, 000 a year. So as I say that, do you think it is earning more money is going to solve your problem, or having a better plan will also be the better idea? Now, individuals who are very low, very low income, yes, it is about earning more income. So I'm not saying that this is for everybody. But at some level It's not about more money. You know, um, last time I talked about financial creep, where you spend what you make, and really being aware of your financial situation on all of the things that need to come together. So as we explore today and talk about stability, And we are moving on to that. Um, I want you to really think about how you can move ahead. If you are somebody who is not prepared for an emergency, um, what you can do with the steps I'm sharing today to help get you in a better situation. Last week I was in a money healing series presentation and if you are a member of my Facebook group or have been on any of my workshops, you may have heard me share or seen me share. My formula for budgeting. Income equals expenses. That is all a budget is. We only have so much income and we need to assign it an expense. Now you're probably thinking I'm crazy because I have not mentioned savings. But what if I shared with you that savings is only money set aside for a future expense? Even if we are creating generational wealth, That is intended to be spent at some time in the future. So I know a lot of people have issues with seeing a bucket of money there and thinking, ah, that's a really nice amount and I could go buy this with it. But if we think about the needs of the future, the needs of the unexpected, we're able to start building, uh, stability, right? Getting away from that fragile state of mind and that anything could happen could set us. So as you start thinking about building your stability, essentially you are building an emergency fund. I don't like Okay, so I'm going to share on my journey, as I was growing, as I was building my stability, they were like, you need an emergency fund. I'm like, okay. Like how much, like, what do I need to do? And, you know, the thing out there at that time was you need three to six months or six to 12 months of expenses in case of job loss. Well, I wasn't in a situation that, you know. 99 percent sure I would not lose my job. So I'm like, okay, but on the flip side of that as well, what about the other things that could happen? How am I preparing for those? Like, if I'm not expected, you know, to lose my job, and even if I am, I guess I should be prepared. I'm following you there. But what about If I need to have my roof repaired. What if my furnace goes out? What if I have a wreck or my car breaks down? How am I covering those emergencies? And so, on my own, but it is also out there now, so I love that other individuals have found it as well. I started creating little emergency funds. Little buckets of money that for me created defining moments of when I could touch that money, right? It's, it was stated already. You need this money in case your furnace goes out. All right. It's, you know, 10 years old, who knows when it's going to go out. So I better be prepared and thinking through all of those things that affected my life. If I go back to my early, early career, my husband and I, and this was back in the nineties, so yes, time was. Money was different. Situations were different, but we had a hundred percent medical coverage. So if somebody were to tell me I needed to save for medical expenses back in that day, I would have thought you were crazy, right? So it just shows that everybody's needs for, quote, emergencies are different. Another way to demonstrate that is If you are renting a home, you are not going to need to repair the roof, right, or the HVAC, or any of that. That does not rely on you. You have different emergency needs, um, different, you know, financial surprises that are going to show up. So as you start thinking about building your stability, you're going to explore your life. You're going to explore what could be your needs in the next 5 years, 10 years, 15 years. So that kind of gives you the groupings. I do my categories fairly broad. I have a home fund. It covers maintenance, repairs, um, if we were to do a remodel, you know, uh, furniture, new furniture, that type of thing. It is all lumped into that. Um, but it took me some time to get there. I had individual funds for a long time. So do what feels good for you. Okay, now you're thinking. But how do I get money in there? How do I create these funds, right? All right, so let's go back to level three. So stability is level four. Level three is breathing room. So as you get into breathing room, that means you have money left over. after every paycheck, right? You're not spending all you make. And I don't know why, but 50 kind of stands out to me, right? Like, Oh, you have 50 left over from that paycheck. That's really good. And over time that will grow, right? As your income increases. Um, as maybe some expenses change and that will, that will essentially grow. But even starting with 50, take a 50 and project into the next week or two into the next month or two. What can you see is coming up that is going to financially impact you? A lot of people, you know, their kids. It's time for them to start school and they're like, Ah, a thousand dollars to get them into school. Alright, that's what you paid last year. So, why did you not prepare for this future expense? That is ultimately the idea of building up this stability. Preparing for number one, first and foremost, those expenses that are going to happen, you know, in their various months, in their various quarters, they're not happening monthly, but they do happen. Birthdays, Christmas, car repairs, car registrations, right? Property taxes, if that's not in your mortgage. Or if you're renting, right? Insurance. If your car insurance is not monthly and it's more, you know, six months or annually, those are the things that you need to be setting money aside for because those are future expenses. We need to make sure we're ready for those to create that stability. So we start there. And then once you build that up and you're, you're pretty much prepared for all of the quote expected, all of the things that you can foresee, then you start building up, um, you know, for some of those areas like medical, we don't know what's going to happen to us one day. So I save my deductible, right? Once I reach my deductible, there's going to be an out of pocket. We know insurance is really just catastrophic coverage. So I figure if I have most of it, hospitals will take payments, right? Those types of things, I can figure it out that way. So thinking ahead, being prepared for those types of situations is very important. Now if you own a home and you've lived there, maybe you bought it new. You're coming up about 15 years. Between 15 and 20 years, things are going to start wearing out, need replacement, you know, need to be repaired, those types of things. I know, and you probably have heard too, there's a lot of individuals that are like, oh, I need a new roof. Well, yeah, after about 20, 30 years, you're going to need to replace your roof. And so they go to their insurance. Right? They pay their deductible, get their insurance to cover it. But all that does is increase your insurance. And so then you're still out that money. So why are you not planning and preparing for those situations? Being able to, you know, pay in cash is also huge. Um, I know individuals have gone to other departments and they get two years quote free interest, but they pay double what I did. You know, so in a sense, I don't think it was free. And so just trying to get you to explore all of those things. So as you get the breathing room and you move into, you know, building up your stability buckets, sinking funds, saving buckets, whatever you want to call, and then you start building up for those. goals and those dreams. What is it that you aspire? What is it that you want out of your money? Right? Are you vacationing once a year? Are you, um, wanting to, you know, support your kids in college? Whatever it may be. Preparing for those types of situations. And then also, um, the next level is flexibility. That's two years as he states. Two years of, um, expenses covered, right? So getting to that next growth phase, honestly, define that for yourself. What does flexibility mean? Does it mean that you've saved up enough that you can cut back or flexibility that you just know if something were to happen, you're ready to. You know, take care of it and take it on. But then the next level is a financial independence. So really you're going from financial stability to financial independence. As you build up those buckets and then, excuse me, and then as you move those buckets into your investments, into your retirement, right, that should be a bucket as well. That is going to be a future expense. Who's taking care of 80 year old you? Being able to prepare for that future expense. Again, we're going back to income equals expenses, and that expenses then gets defined out, defined out to all of the different areas. So, all right, you're thinking, where's this money coming from? Think about your monthly income. Think about your monthly bills. That is, you know, X number of dollars. Then think about your expenses. Which, um, you're spending, groceries, fuel, um, eating out, grabbing a coffee on your way to work, entertainment, that type of thing that you normally do, you regularly do, that, what is that total expense? And then, what is left over, because you've covered both of those buckets, what is left over becomes your, quote, breathing room to build your stability. So, as you're sitting there with this amount, and working with clients, um, Regardless of the income they make, we are finding anywhere between 20 to 25 percent quote left over. You will be finding the same thing. And then using that, you look at what is the, uh, future, um, closest in the future impact, financial impact you're going to have. So. So you're thinking this is the end of February. You look ahead to March. What is financially impacting you? Oh, spring break. Yep. We go on that weekend trip or, oh, my kids have that sports tournament and I need to be prepared for that. You're setting aside that quote, extra money to cover those immediate expenses. And then you slowly keep building that out into the next month, into the next month, because you're going to have some months where. You know, nothing really happens, right? It's a quiet month. Not a lot of those extra expenses, those financial surprises, whatever you're defining them as, but yet you, you need to be building that out in two months, hopefully you're, you can build that up to a year ahead, really focusing on gaining stability for yourself, for your family is number one key after, you know. After all the other levels, right? But this is where you're going to spend most of your time building that momentum, creating that momentum to then retire, to then have things paid off, you know, because even in that same bucket, you can create debt payoff. That is an expense, even if you hold it for a little bit and then you apply it, that is an expense as well. So being able to Create the flow, the momentum, that building up of stability to support you in your future is huge. All right, so that's all I have for you today. If you have any questions, please, um, either join us in the Facebook group on the discussion post for all of the questions and where we dive deeper into the specifics or hit me up on Instagram, send me a DM with your specific questions.