What are the 5 Key Steps to Financial Preparedness?

  • Home
  • Videos
  • What are the 5 Key Steps to Financial Preparedness?

TRANSCRIPT:

Trivia time. Who was the third president of the United States? If you guessed Thomas Jefferson, you’re right. He’s also on the $2 bill. One thing most people probably don’t know about Thomas Jefferson is that he also founded the University of Virginia. For those who have studied him in depth, you’d know he’s one of the most fascinating founding fathers.

There’s a famous story about his first meeting to discuss the potential for the University of Virginia. As you can imagine, there were many powerful and influential Virginians with different agendas. Each one of them came together to discuss the future plans and grounds of where UVA now stands. But Jefferson did something no one else did. He was far more prepared than any other person at the meeting. He showed up with meticulously prepared architectural drawings, detailed construction budgets, operational plans, and even proposed curriculums and names of staff he had picked out.

In fact, he was so well prepared that the Assembly had no choice but to accept his vision, and the University of Virginia was founded with most of his proposed ideas. Another founding father, Benjamin Franklin, summarizes this eloquently by saying, “Failing to prepare, you prepare to fail.”

Hi, I’m Ken Hargreaves, President of WealthGen Advisors. Today, I’m going to show you how to approach your finances like a modern-day Thomas Jefferson with these five steps to financial preparedness.

Step One: Set Clear Financial Goals
Goal setting is everything. Without a goal, it’s like jumping in your car without a clear idea of where you want to drive. Start with your long-term goals. When and where do you want to retire? What kind of lifestyle do you want to live? How much will it cost? Once you set your long-term goals, set short-term goals to understand what it will take to reach those long-term ones. Is there a promotion you want? An area of the country you want to live in? Do you plan to upgrade your home in a few years? Goal setting is the starting point.

Step Two: Know Your Budget
What’s coming in? What’s going out? If you haven’t tracked your income and expenses to understand your cash flow, you could be missing out on opportunities to grow your wealth.

Step Three: Know Where to Save
Now that you have an idea of your cash flow, where do you put your extra savings? First, build a cash reserve. Once that’s built, go back to your goals. Are you saving for a new house or vacation? That should be a short-term bucket. Retirement? Long-term bucket, like a 401(k) or IRA. The rule of thumb is to save a minimum of 20% of your income.

Step Four: Risk Management
What’s the point of working hard for years to save money if it can get wiped out in just a few months from an accident or disability? Managing your risks and ensuring you have adequate coverage in case of unexpected events is crucial. Risk management also includes diversifying your assets and investments.

Step Five: Regularly Monitor and Adjust
You wouldn’t spend a ton of money to get a beautiful lawn and garden installed and then never mow, weed, or trim. Goals change, situations change. At least twice a year, revisit your short-term goals. Check your expenses to ensure nothing stacks up. It’s essential to ensure you’re on track.

If you want to be the Thomas Jefferson of your finances, get to know these five steps: set your goals, know your budget, understand where to save, manage your risks, and finally, monitor and adjust. Those five steps might someday put you on a $2 bill.

As always, thanks so much for watching. Please feel free to click below to learn more.

Free Resources

Our Blog

Insightful articles that reflect our low-cost, "stay the course" investment philosophy.

Our Videos

Free videos that cover complex topics in an easy-to-digest explainer style.

Choose your advisor

Ken Hargreaves - Wealth ManagerKen Hargreaves - Wealth Manager

Ken Hargreaves
CFP®, AIF®, AWMA®, CRPC®

Founder, Wealth Manager
Shane Klemcke - Wealth ManagerShane Klemcke - Wealth Manager

Shane Klemcke
CRPC®

Wealth Manager