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Build your financial foundation by creating a budget, tackling debt, and establishing your savings.
With so many competing financial priorities, it can be difficult to know where to start. Before you can move on to bigger goals, it’s important to have a solid financial foundation. To help with this, be sure you know how much you’re earning and spending each month, get a handle on your debt, and establish basic savings, like an emergency fund.
Budgeting and Debt
Build Your Budget
Everyone feels differently when they hear the word budget. It may sound like a chore, it could feel restrictive, or it may feel like a positive first step in organizing your money. No matter how you feel, knowing where your money is going is the foundation of your financial wellness and it doesn’t have to be complicated.
This worksheet will walk you through the various monthly expenses you should consider to ensure you have a full picture of your expenses.
Fidelity’s Plan Your Pay guideline and Spending and Saving Calculator can give you a starting point for building your budget.
Manage Debt
A good first step is making a list of all of your current debt, along with how much you owe, the minimum monthly payments, and the interest rate.
Use this worksheet to help you get started. Just as it took time to build your debt, it will take time to pay it off, but there are a few options to help you get there.
The avalanche method starts with the highest interest rate, while the snowball method starts with the lowest balance. Choosing which method is best for you is a personal decision. The avalanche method can save more on interest, but the snowball method can lead to quick wins and help you stay motivated.
Establishing and Building Savings
Emergency Savings
No matter where you are on your financial journey, it’s important to have cash available for emergencies.
Unexpected expenses can cause a lot of stress and potentially lead to debt, especially if you aren’t prepared.
It’s recommended that you have three to six months’ worth of expenses set aside but start with smaller goals like enough to cover your insurance deductibles, $1,000, or the amount of one paycheck.
Saving for a Goal
Short-term or long-term, big or small, we all have financial goals we hope to achieve in the future.
There are different ways you can save for your goal, depending on how much money you need and how long it will take you to save.
It’s best to keep the money you’re saving for a specific goal in a separate account, so you aren’t tempted to spend it on daily expenses or impulse buys.
If you’re saving short term (money you’ll need in the next few years), you’ll want to keep your money accessible in something like a savings account or money market fund. If you’re saving long term, you may want to look into investing your money to help it potentially grow faster. While you have the benefit of potentially earning interest, there’s also the risk of losing money in the Markets, so evaluate this option carefully.
Have a specific goal in mind? Refer to these resources for tips to help you reach it.
Financial Wellness Checkup
By answering a few questions, you’ll get a financial wellness action plan to help you navigate the basics. As you continue on your journey, be sure to check back to track your progress.
What’s Next?
Grow
Once you have a solid financial foundation, you can move on to bigger goals like saving and investing for retirement with the help of the HP 401(k) Plan.