I'm slightly obsessed with having a solid financial foundation. I talk about it often. Here's what I have as my foundation:

• No short-term debt.*
• An emergency fund. I work on somewhere between three and six months' expenses.
• Dread and disability insurance, in case you lose your ability to earn an income.
• Medical aid.
• Retirement annuity.

You should have this foundation regardless of your financial plan. However, you also need a road map. To get one, start by asking yourself what you want your money to do. This might seem oversimplified, but it can have a great impact on your financial choices.

For example, if you want to travel as much as you can while you're earning an income, your money has to go towards travel. If you want your money to buy you financial independence in 10 years, your money will go towards investments. These options are equally valid. As long as you have your retirement savings sorted, none is more justifiable than the other.

Only once you have a plan and a foundation should you start worrying about discretionary investments. If your plan is any good, it will help you figure out what types of investments would serve you best. For example, if your plan is for your money to buy you a year off work to travel South America, you already have a savings goal and an investment horizon. This will affect how much money you would have to put away and help you find a risk-appropriate investment or savings vehicle.

Knowing the answer to what you want your money to do will impact every financial and lifestyle decision. If you know traveling is your financial priority, you'll also know how buying a new car will impact your ability to travel.

Your financial plan doesn't have to be perfect. It does have to be written down. It has to be detailed enough to keep you on course, but also adaptable enough to allow for major life changes.

In this episode, Simon and I talk about putting together a financial plan. We use that foundation to answer two reader questions about investments. It's a must listen, regardless of where you are in your finances.

*One could make allowances for a home loan here, although I don't have one.

**I say Australian astronaut. I meant Canadian.

Kristia