How to Build a Strong Financial Foundation in 5 Simple Steps

5 min read

A recent LendingClub survey found that 60% of U.S. adults, including more than four in 10 high-income earners, are living paycheck to paycheck. While not entirely surprising given the economic volatility of the past few years, this still translates into a large segment of the population who are carrying a financial backlog into the foreseeable future and who may need some guidance and support. How can we all get to a place where we’re empowered with our money? Let’s first start with a definition.

What is a Financial Foundation?

Having a solid financial foundation means owning more than you owe (positive net worth) and having more money coming in than going out (positive cash flow). Building a solid financial foundation starts with taking care of your immediate needs in a way that also supports the financial goals you’ve set for your future. This means not only setting some basic financial goals, but also being responsible with your daily purchasing habits on top of long-term financial planning. At first, taking even the smallest of steps toward improving the way you manage money can help you make big strides in the direction you want to go.

5 Steps to a Strong Financial Foundation

Putting a strong financial foundation in place is surprisingly straightforward. To help you get started, give your confidence a boost and set yourself up for success using this five-step method to build a strong financial foundation.

1. Get organized

The first step is to know exactly where you are right now with your money. You’ll need to round up some documentation, but this one-time exercise can provide an invaluable baseline view into your financial health.

Start by building a personal balance sheet—a summary of your assets (what you own) and liabilities (what you owe). Your assets may include your bank and investment account balances, the market value of your home, vehicles, valued possessions, and more. Your liabilities are the debts that you owe, such as home and auto loans, personal loans, student loan, credit card debt, and so on. List out each asset and liability individually in a document. This is your personal balance sheet. Once you’ve assembled your personal balance sheet, add up all of your assets and subtract your liabilities to come up with your net worth.

Now let’s look at your weekly and monthly cash flow—your income minus your expenses over a set period of time. Use a cash flow budget template to see how much money is coming in and how much is going out. On some weeks you may see more expenses going out than income flowing in. Use this template to see how adjusting your weekly expenses could improve your cash flow.

Lastly, check in on your credit health by requesting a free copy of your credit report from each of the three major credit bureaus. Carefully review all three of your credit reports, identify any errors or inaccuracies and, if possible, contact each of the credit bureaus—TransUnion, Experian, Equifax—to have them corrected. If the same error appears on all three of your reports, you’ll need to contact each credit agency separately to make corrections.

2. Protect yourself.

Now that you know where you stand, it’s essential to set up a plan that will keep you financially safe along your journey.

Emergency Fund

If you don’t already have one, focus on this first. (Check out our emergency fund essential guide.) An emergency fund is a must-have for keeping you afloat financially (not dipping into debt) when faced with an unexpected expense, temporary loss of employment, or any other financial setback.


Check your insurance coverages—home or rental, auto, health, life and disability. Insurance policies could limit your out-of-pocket expenses when the unforeseen occurs such as surprise medical bills, a car accident, disability, or death of a wage-earner. If you already have coverage in place, review your policies to ensure they still meet your needs or warrant an update since you purchased the insurance. It’s smart to shop around and compare coverage across a few insurers every couple of years. You may be able to find a less expensive policy that provides the same or better coverage.

Estate Plan

Create or update your estate plan, an action plan and legal document used to determine what happens to your assets while you’re alive and after you die. Estate plans may include naming your heirs, dividing up your assets, creating a living trust, and assigning guardians for minors. Laws vary by state, so you may want to consult with an estate planning attorney to help.

3. Prioritize reducing high interest rate debt.

While some debt may benefit your financial situation (such as a home loan), be mindful about over-extending yourself because paying interest on money you’ve borrowed can keep you from putting money toward your other important financial goals. If you have high interest revolving credit card debt, focusing on paying it down is a smart way to eventually free up cash to put toward savings, and building a strong financial foundation.

An accelerated debt repayment strategies like the debt snowball method or the debt avalanche method can help you get started. And to simplify your debt payments and possibly lower your interest rate, look into consolidating multiple loans or credit cards.

4. Define your most important financial goals.

Now that you’ve put the pieces in place to start building a strong financial foundation, let’s focus on what you want your future to look like. Now is the time to spell out the specific financial goals you want to work on in both the short- and long-term. Here are a few goals that are worth putting on your list:

  • Start or increase dollars held in an emergency fund. A good rule of thumb is to have at least three to six months of living expenses saved;

  • Start (or increase your contributions to) a retirement account or 401(k), especially if your employer offers a match;

  • Pay off high-interest credit card debt;

  • Save for a down payment on a home;

  • Pay all of your bills on time (and improve your credit score);

  • Learn how to invest with confidence;

  • Set up a vacation fund and budget (to avoid adding to your credit card balance);

  • Establish a second stream of income.

5. Put your plan into action.

Once you’ve got your balance sheet, cash flow, and financial goals set, start prioritizing the changes you want to make. For instance, identify what changes you can make to your spending that could help you reach your savings goals faster. Or perhaps you want to take advantage of higher interest rates by moving your emergency savings from a regular checking account into a high-yield savings account. Regardless of where you begin, building a strong financial foundation may at first feel like a big hill to climb. Just remember you don’t need to accomplish everything all at once. Here are a few more tips it may help you to keep in mind:

  • Get your budget in place.

Continuing to spend beyond your means and live paycheck to paycheck will not support building a strong financial foundation. Leverage your balance sheet, cash flow statement, and your financial goals as guides to create a realistic budget and plan that reflects your actual income and expenses.

  • Automate your savings and payments.

Make life easier by automating your savings and bill paying as much as possible. Setting up recurring money transfers from your paycheck into your savings accounts or automating your bill payments so you never miss a due date can help you remain disciplined and on track.

  • See your financial plan through.

No matter what your goals, sticking to the plan you’ve created and checking off your accomplishments one by one can help you stay motivated and on track.

The Bottom Line

Building a financial foundation takes some focus, planning, and effort. But when you have a step-by-step process to follow, you’ll start to see real results. Ultimately, this will provide you with the momentum and confidence you'll need to continue to believe in your ability to create greater financial wellbeing for yourself and your family.

You May Also Like

Related Resource Center
Soft inquiries won’t impact your credit scores, and hard inquiries can hurt your scores slightly. Here's what you need to know.
Oct 9, 2023
6 min read
woman on mobile phone image
Having a money plan in place before you turn in your resignation can make the transition smoother. Learn ways to prepare your finances before you go.
Sep 4, 2023
5 min read
Young man relaxing in an orange hammock by a misty lake holding a cup of coffee, looking at laptop on his lap.
Take control of your money and personal wellbeing with tips to recognize burnout and restore your physical, financial, and emotional health.
Aug 7, 2023
6 min read
Woman in pink blazer sitting on ground with laptop in lap next to young girl looking at documents
With six in 10 U.S. consumers living paycheck to paycheck, could budgeting, saving, debt management, or side income be the antidote?
Jul 25, 2023
5 min read
Paycheck to Paycheck
Your credit score plays a role in nearly every financial move you make. Having a great credit score can save you hundreds (or thousands) of dollars a year through lower interest rates on your credit card accounts, personal loans, moving loans, car loans, or mortgage.
Jul 9, 2023
4 min read
Man in denim button up holding a phone, sitting at table smiling
Related Impact
From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.
Nov 13, 2022
2 min read
blog header stackit 765x430 v1-1
Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals.
Oct 2, 2022
5 min read
LendingClub Rewards Checking Nationally Certified as Trusted, Afforda
Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.
Apr 19, 2022
2 min read
Illustration of large number 4 and letter M made up of colorful, tiny illustrations of ethnically diverse people
In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 
Mar 6, 2022
less than a minute read
LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  
Jan 2, 2022
2 min read
Man in blue button up shirt and glasses smiling
Related FAQ's
We offer several ways for you to make your monthly auto loan payment, so you can choose the method that works best for you. A statement will be mailed to you every month that shows the payment amount and due date.
Nov 29, 2023
less than a minute read
LendingClub provides a year-end statement that summarizes your account activity, including how much interest you’ve earned and information regarding Notes tied to loans that have been charged off.
Jun 7, 2023
less than a minute read
Adding creditors to your balance transfer loan is easy.
Jun 7, 2023
3 min read
To qualify for a lending product with LendingClub Bank, you must...
Jun 7, 2023
less than a minute read
You can partially or fully prepay your loan at any time with absolutely no prepayment penalty or fee.
Jun 7, 2023
less than a minute read
Related Glossary
{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.
Sep 6, 2023
4 min read
{noun} The total annual cost to borrow money, including fees, expressed as a percentage.
Mar 21, 2023
3 min read
{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 
Mar 21, 2023
4 min read
A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.
Feb 7, 2023
3 min read
{noun} An interest rate that remains the same for a set time, usually for the life of the loan.
Feb 4, 2023
3 min read

LendingClub Bank and its affiliates (collectively, "LendingClub") do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. LendingClub is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. LendingClub is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving LendingClub’s website. LendingClub does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the LendingClub website.

Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,584 for a term of 36 months, with an interest rate of 10.29% and a 6.00% origination fee of $1,190 for an APR of 14.60%. In this example, the borrower will receive $18,663 and will make 36 monthly payments of $643. Loan amounts range from $1,000 to $40,000 and loan term lengths range from 24 months to 60 months. Some amounts, rates, and term lengths may be unavailable in certain states.

For Personal Loans, APR ranges from 9.57% to 35.99% and origination fee ranges from 3.00% to 8.00% of the loan amount. APRs and origination fees are determined at the time of application. Lowest APR is available to borrowers with excellent credit. Advertised rates and fees are valid as of July 11, 2024 and are subject to change without notice.

Checking a rate through us generates a soft credit inquiry on a person’s credit report, which is visible only to that person. A hard credit inquiry, which is visible to that person and others, and which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person. Credit eligibility is not guaranteed. APR and other credit terms depend upon credit score and other key financing characteristics, including but not limited to the amount financed, loan term length, and credit usage and history.  

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. ​Deposit accounts are subject to approval. Only deposit products are FDIC insured.

“LendingClub” and the “LC” symbol are trademarks of LendingClub Bank.

© 2024 LendingClub Bank. All rights reserved.