Being financially sound doesn’t mean being rich or making $1 million dollars.
Being financially sound means that you don’t live your life panicking about money or worried about making ends meet.
To me, financially sound people have enough money to live comfortably without worrying about money.
Financially sound people possess a healthy financial mindset and have a positive and abundant outlook about money, allowing them to feel financially comfortable.
Some things to ask yourself to know if you are financially sound include:
- Do I have enough money each month on hand after I pay my necessities and bills?
- Do I feel comfortable talking about finances, or would I rather not because it makes me worried?
- If I lost my job, would I have 6-8 months of savings saved?
- Do I have a general budget, or do I buy whatever I want without thinking about it?
- Am I able to invest part of my money in some investment vehicle, such as a 401(k) for retirement?
If you wonder what it means to be financially sound and want to start becoming more financially secure in your life, this article will help guide you in the right direction.
Being financially sound means that you have a positive attitude towards money, a stable income, a solid budget, and the opportunity to invest your money somehow.
Financial security looks different for every person, but the underlying concept of being financially secure means NOT worrying about money constantly.
This article will discuss the top 7 ways you can make progress towards being financially sound. These ways include:
- Having a positive attitude towards money
- Figuring out your personal goals and how you’ll reach them
- Creating a solid budget
- Start living below your means
- Focusing on your savings and building an emergency bucket
- Starting to invest your money, even if it’s a small amount
- Learning more about personal finance
1. Have a positive attitude towards money
The first way to be financially sound is to adopt a positive money mindset.
With a positive money mindset, you can do anything you put your mind to, including paying off large amounts of debt, saving for a big new purchase, or putting yourself or your child through higher education.
We all have a unique mindset and view of the world, and our money mindset is no different. A money mindset is our feelings, thoughts, and beliefs towards money, which can be either negative, positive, or neutral.
For example, if you had a parent that always complained about money or not having enough while growing up, you could have a negative mindset around money and begin to think that money is a source of evil.
On the other hand, if you had a mentor at a young age who encouraged you to go after your dreams and told you that money would follow once you pursue your goals, you may think of money as a tool to get you somewhere – and have a more positive mindset towards money.
If you have a neutral mindset about money, you may tend to ignore your financial health or anything related to money because you don’t think you can improve your situation. Or, you also may never have thought about your finances and have always remained in a neutral state regarding the topic because you don’t believe you can change the way things are.
Either way, you have the power to change your money mindset and are in charge of how you think about, interact with, and learn about money moving forward.
One of my favorite ways to practice a positive money mindset is by practicing mindfulness.
Mindfulness is a broad term that can come in different forms but is a helpful tool in dealing with anxiety and stress. Mindfulness can lead to a more positive sense of self, awareness, and thoughts.
If you are more interested in learning about money mindfulness, check out my article that discusses how to manage mental health with financial stress.
Another simple and effective way to practice a positive mindset towards money is through positive affirmations.
Positive affirmations are statements that affirm something to be true and are practiced by repeating a particular phrase.
By repeating a particular phrase, affirmations are theorized to become self-fulfilling through your subconscious mind by attracting what you focus on the most.
Some money mindset affirmations include:
“I am worthy of financial security and success.”
“I have an abundance of money.”
“I can conquer my financial dreams and goals.”
“My life is full of wealth, health, and success.”
2. Figure out what your personal goals are and what you want in your life
The second thing you should do to make progress towards being financially sound is by getting clear on your financial goals.
Creating goals can be intimidating but can be crucial to your long-term success. Goals can give you a roadmap or sense of direction even when you feel at your lowest or confused in life.
Goals can also be a great reminder to keep going despite challenging times and encourage us to continue working towards the things we desire.
First, start by getting out a blank piece of paper or opening up a blank document on your computer and labeling it something like “My Financial Goals.”
Be as creative as you can here – what kind of goals do you have for this week, next month, and next year? Divide up the sheet with your 1 year, 5 years, and 10-year plan and write down where you want to be financially at that time. Does this include buying a house or creating a business?
These goals will look different for everyone, but the most important thing is figuring out your own goals so that you know where to head.
3. Create a solid budget and an actionable plan
After you set your goals, the next best step is to create a solid budget and actionable plan to help get you to where you want to be.
Creating a budget will look differently for everyone depending on your goals.
If you are looking for a simple budgeting tracker, feel free to download the free consumer.gov “Make a Budget” template here. If you prefer to make a budget tracker yourself, try using google sheets or excel in making it feel more organized.
When creating a proper budget, it’s essential to know what your take-home pay is each month after tax is deducted (this final take-home home is also known as net pay).
If you are interested in learning more about what specific things come out of your taxes (and if you live in California), you can read more in my article, “Missing Money on Your Paycheck? How to Read Payroll Taxes and What the Withheld Numbers Really Mean (In California).
4. Start living below your means
Once you get a sense of what your budget looks like, you have to start living below your means.
Living below your means is a straightforward way of saying that you should not spend more money than you earn or take in.
Living below your means is a great way to start heading towards a financially sound life because it enables you always to be comfortable with money.
Living below your means takes a strong and determined mindset, but once you get in the habit of not buying the things you don’t need or can’t afford, you will develop another positive money habit that will last you a lifetime.
If you are interested in learning more about how to live below your means, check out my post “Living Below Your Means – 5 Ways to Successfully Do It.”
5. Focus on saving for an emergency
A financially sound person understands that emergencies may happen in life and know how important it is to save for them if they do happen.
Life is unpredictable, and we will never know when we may need some extra cash on hand for situations. Some unexpected cases can include losing your job out of the blue, having to have a health procedure done, or replacing a car part because your car decided to stop working on your way home.
Whatever the situation is, these emergencies are usually not planned.
A good rule of thumb is to have at least 3-6 months of savings in an emergency savings fund for these unplanned events
If you don’t have any emergency savings fund, don’t worry. Start by trying to place a few dollars a week away, and continue to be consistent.
“It does not matter how slowly you go as long as you don’t stop.”
Confucius
6. Start investing, even if it’s small
Financially stable people know that just their savings or income alone won’t lead to financial success.
If you want to be financially stable for a more extended period, you should consider investing part of your earnings into an investment that will work for you over time.
Investing comes in many forms – but it isn’t just for the rich. Investing is so powerful over time due to compound interest. Again, investing consistently will be the key to your money’s growth.
The earlier you start investing, the earlier you will utilize the power of compound interest and time. If you want to learn more about investing without risking it all, read my article, “5 Great Reasons To Invest Early and How to Without Risking It All.”
7. Spend time learning more about personal finance
If you want to be financially sound in your life, you must dedicate time to learning about financial literacy.
Financial literacy is generally not taught in school, so we must take it upon ourselves to learn how finance truly works.
There are so many ways to learn about personal finance these days – through modern books, blogs, podcasts, Youtube videos, TikToks, and more. The fact that you are reading my blog indicates that you are interested in personal finance, so keep it up!
If you have some downtime during your day, it only takes 5-10 minutes to learn something new about money.
Related Questions
What’s another word for financially stable?
The term financially stable can come in many forms, but there are similar terms in English that also mean to feel confident regarding your financial life without worrying about money.
These terms include financially sound, financially confident, or financially independent.
What does financially sound mean in a sentence?
Ex: “Because my sister saves her money, lives below her means, and practices good spending habits by sticking to her budget, I think of her as a financially sound person.”
How much money is considered financially stable?
There is no exact amount that is considered financially stable. However, if you can get to a point where you have emergency savings, pay off your bills without debt, and are not constantly worried about money, you are most likely financially stable.
What happens if I am not financially sound?
If you don’t think you are financially sound or are far away from feeling content with your financial life, don’t worry! Nothing is wrong with you, and you have the power to change this.
If you don’t think you are financially sound, ask yourself these questions again and see how you can create specific goals towards them:
- Do I have enough money each month on hand after I pay my necessities and bills?
- Do I feel comfortable talking about finances, or would I rather not because it makes me worried?
- If I lost my job, would I have 6-8 months of savings?
- Do I have a general budget, or do I buy whatever I want without thinking about it?
- Am I able to invest part of my money in some investment vehicle, such as a 401(k) for retirement?
For example, if you said no to the question “if I lost my job, would I have 6-8 months of savings,” then you should create some goasl or intentions towards working on your emergency savings.
Final words
Living a financially sound life should be a goal of yours, even if you don’t think it should be. If you are worried about money and don’t see a way out, making small steps in the right direction can lead you to a more fulfilled financial life.
Being financially sound isn’t about being rich or having millions of dollars, but instead is about being in a good place that you can afford to save, invest, give to others, and be happy.
I hope that this article helped you learn about what it means to be financially sound and take actionable steps towards a better financial life.
Ashley is a finance graduate from the University of San Francisco and currently works at a financial technology startup in San Francisco that is focused on providing affordable and accessible 401(k) retirement plans to other startups and small businesses. Prior to working at a startup, she was an associate at a large private wealth management firm working with high-net-worth clients. She is born and raised in Orange County, CA, and loves spending time at the beach, in a pool, reading, and with her friends.
