Back to Basics: 9 Money Moves for a Solid Financial Foundation

Personal finance is personal: there’s no one-size-fits-all answer to sound money management. But while the specifics vary depending on your personal situation and needs, there are still universal money principles that are key to financial success.

Even when the details of financial planning get hairy, the core elements of money management are pretty simple and straightforward. Shoring up these money basics will give you a strong financial foundation for the life you want. Here are the basics to focus on to secure your financial health and future.

Grow your income

To have a solid financial foundation, you need materials to build it with: your income. Staying focused on growing your income is crucial to being financially secure now and throughout your life. It will give you skills, experience, and work history that will continue opening up new opportunities for career growth and increased earnings.

So think first about how to grow your income, starting with your main gig. It could be working toward a promotion, gaining training or education to boost earnings, or asking for a raise you feel you’ve earned. Growing a side hustle can also be a way to earn extra money and build skills on top of what you’re doing in your day job.

Save a portion of all earnings

Saving is a crucial habit for financial health, and one of the best ways to build this habit is to save a percentage of your income. An upside to this method is that the amount you save will grow as your income grows.

If that feels daunting, start small: saving even 2% of your income or $10 a week can add up and help you get ahead. Then you can work toward increasing that 1% or $10 at a time until you’re saving more. Most experts recommend getting to the point where you’re putting away 10-20% of income toward short- and long-term savings.

Spend first on what matters

As you focus on growing income, you should also work toward more effectively managing the money you already have coming in. Having a budget or spending plan is a must-have tool to understand your spending and ensure money is being allocated to necessary and important expenses.

It’s a good idea to regularly review your spending or budget to be sure your spending matches your needs and priorities:

  1. Start with living expenses — costs that you need to pay to keep yourself alive and employed or otherwise earning income.
  2. Put money toward insurance and goals that will keep your finances healthy (such as the steps we address below).
  3. Plan spending on “wants” that are meaningful to you, whether that’s a video game subscription, a high-end gym membership, or even fresh-cut flowers. 

Trim wasteful spending

Wasteful spending takes your cash without offering your much value in return, especially when compared to other ways you could use that money.

Review spending regularly to spot wasteful purchases because you don’t use it or could do without. If you’ve stopped going to the gym, for instance, you can safely cancel that membership. Look for wasteful spending even in your “needs,” too. Yes, rent is a necessary living expense — but that doesn’t mean you need to choose a two-bedroom apartment when you live alone. 

Maintain emergency savings

Building an emergency fund means stashing away cash or easily-accessed assets that you can use to cover expenses in a crisis. Instead of scrambling to figure out how to cover bills if you lose a job or come up with a plan to pay for a medical expense, you can tap emergency savings. Even a small savings fund can buy you some stability in the middle of an emergency and some extra time to find options and solutions.

If you have no emergency savings, a good place to start is saving at least $1,000 per person you support, or one month’s worth necessary expenses — whichever is greater. Once that’s established, keep saving until you have an emergency fund in line with your financial responsibilities, income security, and risk tolerance.

Protect yourself with insurance

On top of emergency savings, insurance adds additional layers of protection for events that are otherwise difficult to plan and pay for. Buying adequate insurance coverage can protect you from worst-case scenarios and give you a lifeboat to get through some of life’s worst storms. 

  • Health insurance can help cover medical costs.
  • Life and disability insurance can provide financial protection for you and your family against the loss of your income. 
  • Homeowners, renters, and car insurance protect your assets from disasters and losses. 

Responsibly manage credit and debt

Building good credit and keeping debt affordable is another basic ingredient of good financial health. 

  • Build good credit. Having a good credit history keeps your borrowing costs low, and ensures you can access credit when you need it. Make sure you’re paying debts on time and sticking to other habits that build credit.
  • Pay down high-interest debt. Debt with high rates, including credit cards and personal loans, can cost you a lot to hold onto. Making extra payments can lower the total interest you pay and get rid of this debt faster. 

  • Keep monthly debt payments affordable. When considering taking on new debt, make sure you can comfortably fit the new payment into your budget. You don’t want to stretch yourself too thin, risk missing payments, or having a debt-to-income ratio that’s too high.


Save for retirement

Contribute to retirement accounts early, often, and adequately. This will give your retirement savings and investments more time to grow, and for compounding returns to do their magic. 

If your employer matches retirement contributions, take full advantage — it’s free extra compensation. Keep increasing contributions as you’re able. Invest with tax-advantaged retirement accounts as well, including individual retirement accounts (IRAs) or 401ks in the U.S., or registered retirement savings plans (RRSPs) in Canada.

Diversify your investment portfolio

Retirement accounts aren’t the only way you can or should consider investing. There are many ways to invest and get your money to work for you. There are stock shares and related assets, like mutual funds, index funds or exchange-traded funds. You can also invest in real estate, bonds, and other cash equivalents as well.

Keep in mind that none of the above moves are one-time actions or quick fixes. Rather, these are sound guidelines that you can use to build wealth faster while protecting yourself from financial losses. Following these financial principles is a matter of ongoing effort and habitual practice. Improve where and when you can, and you might be surprised how much financial progress you can make.

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