What does being financially sound actually mean?
And is it something that is important enough for you to take time out to find out more today?
Yes, you should, because being financially sound is too crucial to ignore!
Being a financially sound person could mean having a good job and income in order to give your family a stable future. Or it can also be about your individual savings and investments for when you retire. Both are crucial elements of being financially sound.
There are many things that count in the game of becoming financially stable and secure in life. And they rarely have anything to do with luck, winning the lottery or a family inheritance.
It’s about you, the choices and decisions you make both now and in the future, to create the stability you need.
You have the power to make your financial life better.
Truthfully, if you want to become financially sound, you going to want to learn how to make smarter financial decisions.
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Why is it important to be financially sound?
The benefits of being financially sound are many, but the most important are:
1. You have a lot more control over your future and can do things such as; save up a down payment and buy a house, pay off debt faster and retire early.
2. You can set aside money for an emergency fund to prevent yourself from going into debt if something unexpected happens.
3. When you’re financially sound you don’t have to worry about losing your job or not being able to afford the basic necessities.
What’s another word for financially sound?
Another way to describe what financially sounds means is to say a person is financially stable. Financial stabily means you don’t suffer from peaks and troughs of money goings on. You’re more like a ship, steady as she goes.
How do you find financial stability?
Finding financial stability is something we all crave. You’ll find it through making sensible decisions about your money. Decisions that mean you put your long term goals before short term fun.
What do you call someone who is financially savvy?
Sensible and grown up! Seriously though, a financially savvy person is someone who’s got their priorities correctly lined up. They know they need to plan a long way into the future in order to be stable and safe.
how can i be a financially sound person?
Many people spend more than they earn each month. They do this because they want the things that money can buy, like a new car, an expensive holiday or even designer clothes!
Because of this habit, they spend more than they have and end up borrowing to pay for their lifestyle. Sadly, not everyone manages the debt they have and this can lead to financial trouble.
If you want to be financially sound, it is important that you do not spend more than you earn each month.
You want to be spending less than you earn, not spending every penny. Live below your means, always, and save the rest. That will give you real financial stability.
Examples of financially sound decisions
When you create and save into an emergency fund you are making the right choice not only for yourself but also your family’s future. That money will help keep things secure should something go wrong.
By doing so you are improving your financial situation, giving yourself peace of mind and creating a financially sound family.
Here’s another example: When you start to save for your retirement in a fund or pension you are taking the first steps on the road to being financially secure and independent.
That’s not only good for you but also a cause for celebration if you have children or other people who depend on you financially.
I know saving for an emergency fund and pension may not be the most exciting way to spend your money, but we both know they make sense financially.
7 tips to help you become financially sound
When it comes to being financially secure there are many different things you can do to achieve this goal.
How you spend your money and make money decisions are the key, even if they don’t feel exciting.
It may mean sometimes saying no to things like gadgets that come along with newer models released every year. On the plus side there are many things you CAN do to make yourself financially sound.
1. create a plan
Always have an idea of what you are doing with your money. A plan makes you think about how much money you make and where it goes – it also helps save a lot of cash.
The first step to a successful budget is to know how much money you make. Next, figure out your monthly expenses and what they are for, like rent or mortgage payments.
Consider any other costs that might pop up in the future and put them into the plan as well. Finally, set your savings goals:
- Do you have a clear vision for your financial future?
- What kind of life do you want to live at the end of it all and what does that mean financially?
- Where would be “home” in 10 years or 30, if money were not an issue?
2. save more and spend less
This is probably the most important tip you’ll ever read. Saving a lot of money requires sacrifices but there are ways to do it without missing out on everything. How?
By doing simple things like: not using your credit card for everyday spending, saving part of every paycheck.
And reducing your spending so you can find some extra income each month. For example by cutting back on your cable TV subscription or reducing your cell phone contract.
3. invest in your financial education
In order to make sensible financial decisions you need at least a bit of knowledge about the subject.
Especially if you feel like you’re playing financial catch up and have no idea what’s going on with your money or how it works. It may be time for a refresher.
A good place to start is your library. There are a million personal finance books that will grow your knowledge several times over.
These are my favorite personal finance books that I recommend you start with. If you can’t get them from your library, Amazon will likely have a used copy cheaper than the new price.
4. start an emergency fund
Having some cash saved for a rainy day is always a good idea, especially if you have little or no savings at all now.
All that’s needed to get your emergency fund started is $1000 which can then be put away in case of any emergencies (health-related or otherwise).
Once you have achieved that, set up regular payments to top it up with every paycheck and in no time you’ll have a solid emergency fund.
There will always be emergencies that come our way. Whether it’s a medical emergency, losing your job or car breaking down etc, you need to have the right financial plan in place. I hate to say it but there’s no excuse for not being well prepared!
5. get out of debt
There are a lot of different strategies to follow here but the main thing is to run away from it as fast as you can.
Debt will make your finances unstable and ruin all the hard work you have put in so far. While you are at it, make a decision to steer clear of accumulating more debt in the future too, especially credit cards.
Credit card debt is one of the most dangerous types because you can get caught in cycles of repayment that take years to pay off.
6. cut costs
Making small changes in your spending habits can make a big difference over time. Aim to be the smart shopper who comes home with exactly what they want for less than they expected to spend.
You don’t have to do everything at once but making one small change each month will add up to huge savings over time.
7. look for additional income streams
If your job doesn’t provide you with enough money and you’d like to make some more cash on the side, then consider making a few extra bucks by taking up a side hustle.
Things are very much on the up here and you will find all kinds of ways to complement your main jobs with other sources of revenue.
start a pension plan
This is less a tip and more an absolute necessity!
If you haven’t already then today/this week is the time to set up a regular retirement contribution into a pension scheme.
You don’t want to be caught unprepared for life after retirement, do you?
With automatic payments starting from your paycheck and going straight into an account that will grow with time instead of shrinking (with excuses like “I forgot,” or “I’m saving”), it’s easier than ever!
You can then sit back and look forward to retirement knowing that your retirement income is taken care of.
make smart financial decisions
In order for this to work, don’t be tempted by sales or credit offers. Try to stick to a game plan with respect to long term savings goals.
Remember that there isn’t only one best way of doing things financially, there are plenty of different and good ways. Find the method that works best for you!
If you want to live comfortably now and in the years ahead then get financially sound first! It may seem like a lot but getting financially stable just requires sticking to a plan and starting small.
Before you know it, you’ll be well on your way to achieving financial freedom without the stress of throwing money around.
Start taking back control of your money by grabbing your copy of the Money Saving Starter Guide today.
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Last Updated on 19th October 2021 by Emma