A recent Lending Club survey found that 60% of American adults, including more than 4 in 10 high-income earners, are living paycheck to paycheck. That is not entirely surprising given the economic instability of recent years. Large segments of the population are still financially marginalized for the time being and may need some advice and assistance.

Let's start with the definitions.

Having a strong financial management base means having more money than you owe (positive net worth) and having more money coming in than going out (positive cash flow). Building a solid money-related establishment begins with prompt assembly needs in a way that too underpins the money-related objectives you set for the end of the. This means not only setting basic financial goals for yourself but taking responsibility for your long-term financial planning as well as your daily shopping habits. Even small steps to improve your money management at first can help you make big strides in the direction you want to go.

Building a strong financial risk management foundation is surprisingly easy. Get started with this 5-step method to boost your confidence, set you up for success, and build a strong financial management foundation.

The first step is knowing exactly where your money is. You'll need to collect some paperwork, but this one exercise will give you a valuable basic picture of your financial risk management situation.

First, create a personal balance sheet, an overview of your assets (what you own) and your liabilities (what you owe). Assets include bank and investment account balances, market value of homes, cars, valuables, and more. Debt is anything you owe, such as your mortgage, car loan, personal loan, student loan, or credit card debt. Document each asset and liability separately. 

This is your personal record. Once you have your personal balance sheet, add up all your assets and subtract your liabilities to get your net worth.  

Now let's look at the weekly and monthly cash flow, which is income minus expenses over a period of time. See how much money is coming in and how much is going out with the cash flow budget template. Depending on the week, you may spend more than you earn. Use this template to see how adjusting your weekly expenses can improve your cash flow.

Finally, check your credit score by requesting a free copy of your credit report from one of the three major credit bureaus. Carefully review all three credit reports, identify any errors or inaccuracies, and, if possible, contact each credit bureau, such as TransUnion, Experian, or Equifax, for correction. If all three reports have the same error, you will need to contact each credit bureau individually to correct it.

Now that you know where you stand, it's important to develop a plan to ensure financial risk management security for your trip.

If you don't already have one, take a look at it first. (See our guide to emergency funds.) To survive financially (and stay out of debt) in the face of unexpected expenses, temporary unemployment, or other financial management hardships, having an emergency fund is essential.

Check insurance coverage for home or rental, car, health, life, disability, and more. Your policy may limit your out-of-pocket costs in the event of unforeseen events such as unforeseen medical expenses, car accidents, disability, or death of an employee. If you already have insurance, make sure your policy continues to meet your needs or if renewal is justified after purchasing the policy. It is wise to check every few years and compare coverage from several insurers. You may find cheaper insurance that offers the same or better coverage.

Create or update estate plans, action plans, and legal documents that define what happens to your assets during your lifetime and after your death. Estate planning may include the designation of heirs, the division of estates, the establishment of livelihood foundations, the appointment of minor guardians, etc. Laws vary from state to state, so you should consult a real estate planning attorney about this. 

Some debts (such as mortgages) can be positive for your financial risk management  situation, but paying interest on the money you borrow can prevent you from using the money for other important financial purposes. You have to be careful not to overuse it. If you have high-yield revolving credit card debt, focusing on repaying that debt is a wise way to ultimately save cash and build a strong financial foundation.

Accelerated debt repayments strategies such as debt snowball and debt avalanches can be initiated. Also, consider consolidating multiple loans or credit cards as it simplifies debt payments and may lower interest rates.

Now that you have all the ingredients to build a strong financial risk management foundation, it's time to focus on what you want your future to look like. This is where you formulate specific financial goals that you want to achieve in both the short and long term. Here are some goals worth putting on your list.

Create or increase an emergency fund. A great run the show of thumb is to spare at slightest 3-6 months of living costs. 

Open a retirement or 401(k) account (or increase your contributions), especially if your employer provides subsidies.

Pay off high-interest credit card debt.

Save as a home down payment.

Pay all your bills on time (and improve your credit score).

Learn how to invest with confidence.

Set vacation funds and budgets (to avoid adding to your credit card balance).

Create a second source of income.

Once you've established your balance sheet, cash flow, and financial goals, start prioritizing the necessary changes. For example, find out what changes you can make to your spending to reach your savings goal faster. Or maybe you want to move your emergency savings from a regular checking account to a high-yield savings account to take advantage of higher interest rates. Regardless of where you start, building a solid financial management foundation can initially feel like a big mountain to climb. Note that you don't have to do it all at once. Here are a few more tips to keep in mind. 

Get your budget in place.

Continuing to spend more than you earn and live on your paycheck doesn't help you build a strong financial base. Use your balance sheet, cash flow statement, and financial goals as a guide to creating realistic budgets and plans that reflect your actual income and expenses.

Automate your savings and payments.

Make your life easier by automating your savings and billing as much as possible. Whether it's setting up recurring transfers from your paycheck to your savings account or automating bill payments, you can stay disciplined and stay on track by staying on top of deadlines. 

Please review your financial plan.

Whatever your goals are, sticking to the plan you've created and seeing every single achievement you've made will help you stay motivated and on track.

Building a financial foundation requires a certain amount of focus, planning, and effort. But if you follow the step-by-step process, you'll start to see real results. Ultimately, this will give you the momentum and confidence you need to continue believing that you can further increase the financial well-being of yourself and your family.