A solid personal finance requires a strong foundation.

Not building our financial foundation properly will be like building a house without a proper footing. So, like in construction, we must also follow a hierarchy with our finances. We can't start from the bottom of the ladder and immediately jump to the top and invest because we'll set ourselves to failure if emergencies happen.

Please note that these steps assume that the reader is in their 20s and doesn't have debt.

These simple steps can guide you as you build a stronger financial foundation, especially in your 20s.

Step 1: Manage Your Personal Cash Flow.

It's crucial to take a hard look at your cash flow early in your career.

A personal cash flow can simply be the money left from our income after deducting our expenses, which can be positive or negative. However, before we proceed to the next step, we need a positive cash flow, which means our bare necessities are already covered. So, if you're still negative, you may want to find ways to save money or earn more.

Once your cash flow is secured, the following steps become more realistic.

Step 2: Invest in Your Healthcare and Insurance.

Many young people neglect getting health care and insurance plans when it's cheaper.

Though it's understandable when starting their careers, it's still an essential part of our financial journey. Our health care and insurance plans help us buy peace of mind that our family and loved ones will not be burdened if something terrible happens to us. Ironically, a car or motorcycle is sometimes comprehensively insured, but the driver is not.

By buying health care and insurance plans, we're transferring some of our risks to the insuring companies.

Step 3: Save For Your Emergency Fund.

An emergency fund is your financial safety net for unexpected events.

An emergency can be anything that can derail your finances, like suddenly losing a job, immediate home or car repair, or other similar scenarios. As a rule of thumb, an emergency fund is three to six months' worth of your expenses that will cover those emergencies. However, since we live in a country with a limited public healthcare system, we can increase our emergency fund to up to a year's worth.

You'd be thankful if you saved up for an emergency fund once you needed it.

Step 4: Start Investing.

You must delay investing while you still haven't covered the early steps of the hierarchy.

However, if you're already covered, there are many investments to choose from depending on your goal, time horizon, risk appetite, and skills. You can consider mutual funds, the stock market, crypto, real estate, PAG-IBIG MP2, a business, or more.

If we skip the process of building a solid financial foundation and go directly to investing, one major emergency will wipe out all our hard-earned investments.