Build your financial house from the ground up

Nobody builds a house roof first. Yet many people start their finances with the exciting part, investing, while the foundation underneath is cracked. A financial house puts things in the order that keeps everything standing.

Foundation: emergency fund and protection

Aim for three to six months of expenses in savings you can reach quickly. Then protect the income that pays for everything else, with life insurance sized to your real need and coverage if illness or injury keeps you from working.

Walls: debt management

High-interest debt works against every other goal. A common guideline is to keep non-mortgage debt payments under 10% of take-home pay, and to pay down the most expensive debt first.

Upper floors: retirement and education

Saving about 15% of gross income for retirement, including any employer match, is a widely used target. Education savings for children come next, ideally started early so time does more of the work.

Roof: legacy

A will, named beneficiaries, and an estate plan decide what happens to everything you built, and who decides for your children if you can't.

Check each level honestly. The weakest one is usually where your next dollar should go.