Financially sound is the term equivalent to financially secure
But what does it mean to be financially secure?
Well it is a state of reaching good financial state and taking the best financial decisions
For example, you are taking a financially sound decision when you decide to fight your debt and pay it off fast
What does financial sound mean?
Financial sound is the financial decision you take that makes you proud of yourself for the rest of your life
I consider myself taking a good financial decision when I started saving for kids’ RESP
RESP stands for Registered Educational Saving Plan in Canada
This saving decision is accumulative I save $5000 each year for my 2 sons
I cannot start saving when they are 14, it will be too late to catch up the necessary amount for both kids
Tips to become financially sound
Now you understand what financially sound mean
Let me tell you that these below tips are the best financial decisions to make
1- Create a financial plan
A financial plan is like a map
How do you expect to do to your destination without a map?
If you decide let’s say to save for your retirement you have to decide how much you want to get when you reach your retirement age
Any financial advisor can help you reverse engineering the numbers for you and tell you how much to save every month
My financial advisor recently told me that investing getting $100,000 after 10 years that requires to invest $5,000 annually with 7% interest
Just focus on your destination and you will be able to find where to start from today
2- Pay yourself first
A very good financial decision is to save money before you spend your income on all expenses
What is going to happen you will adjust what is left to cover all your spending
3- Pay off your debt
Taking the decision to fight your debt fast is very rewarding
I know it might be intimidating and you would feel you won’t make it
Once you start never look back
4- Build an emergency fund
It is very frustrating when you switch on your car and you discover it is not working
What make the situation worse is not having the emergency fund to fix it
Building your emergency fund is a wise decision only those who use it appreciate how financially sound it was when they saved money for that purpose
5- Invest in your retirement plan
Don’t ignore the fact that one day you will have to retire
Please do yourself a favor and plan for that moment
I knew many examples of people who started in their forties – I know it was too late
Good news is they were committed and saved the right amount to retire in their 65
6- Practice living frugally
It is very hard to explain living frugally as people confuse it
They think about it as living stingily
Actually there are many things you can do in life to express how you can live frugally?
Like using your own bags while doing for grocery shopping
Buying a family portion from the menu when dinning out and many more things
7- Buy insurance policy
Buying life insurance is one of the wisest decision to make
Although some people think of it as wasting your money
I see based on what you pay monthly on many life insurance policies a little compared to the unknown God forbids that can happen anytime
8- Beat your financial literacy
Nothing is best than educating yourself with the basic financial literacy
I recommend you read my post on teaching yourself financial literacy in an hour
Knowing the basics can save your life from taking bad financial decisions that can cause you to fall in debt