How financially sound are you?

Although we own 6 Canadian banking stocks,we use Coast Capital Savings for our day-to-day banking. We are happy Coast Capital Savings customers.

The other day I got a letter from Coast Capital Savings stating that they would give me $40 by scheduling and attending a Money Chat appointment. Basically Money Chat provides a snapshot of your overall personal financial health and how the Coast Capital Savings can help improving it.

I know we are doing well financially but I will never say no to free money, especially when the appointment should only about 30 minutes.

So I schedule for an appointment and went to see one of the financial experts. Easy $40!

What I like about Money Chat is that Coast Capital Savings made it really easy and straight forward. During Money Chat you are asked to take a few minutes to answer 12 money questions divided in four different sections.


Manage – “I keep my spending in check.”

Save – “I regularly put money aside.”

  • Do you have different pots of money set aside for your regular expenses
  • If you’re planning a major purchase, like a house or a car, are you ready to buy?
  • Do you regularly put aside money for the future?

Grow – “My money is working as hard as it can.”

  • If you own a home, are you paying it off as fast as you’d like?
  • Do you feel you have a good understanding of your investments?
  • Are your investments working hard enough?

Protect – “I’m ready for any bumps in the road.”

  • Do you have coverage in case you aren’t able to work?
  • Do you have protection for your family and belongings?
  • Is your lifestyle the same as it was last year?


I aced the test and answered yes for all 12 questions. Woohoo! 🙂

How did you do?

Let’s go over each question one by one.

1.Do you spend less than you make?

To be financially sound, your expenses need to be less than your income. (Notice how I didn’t say equal). The bigger the difference between income and expenses (i.e. savings rate), the faster you can grow your net worth and achieve financial independence.

2. Do you pay off the balance on your credit card every month?

One of the most important things to be financially sound is to not have consumer debt. You can avoid consumer debt by paying off your credit card balance every month. Why? Because when you are paying 19.9% interest on the amount you owe, you will never get ahead financially.

If you aren’t responsible with credit card usage, perhaps using cash is a good option for you. But don’t stuck in cash mode forever.

3. Would you be okay if you missed one pay cheque?

If you are spending less than you earn, you should be OK. By spending less than you earn, you are creating a buffer each month. This buffer can be used in case you were to miss one pay cheque. Having an emergency fund would also come in handy.

4. Do you have different pots of money set aside for your regular expenses

Having different pots of money set aside for the different expenses is how we do our monthly budget. Does it work? Oh yes! By using this budget system, our net worth grew by 250% in 5 years.

5. If you’re planning a major purchase, like a house or a car, are you ready to buy?

You should be setting money aside each month in case you need to make a major purchase in the near future. We put a set amount in our LTSS account (Long Term Savings for Spending) each month for things like vacations and other big item purchases. Having money set aside for a major purchase will reduce the need to take out a large loan or the need to carry balance on your credit card.

6 Do you regularly put aside money for the future?

With our budget system, we pay ourselves first each pay cheque by allocating a set amount of money. That money is then used for purchasing appreciating assets, like dividend growth stocks, index ETFs, or other growth stocks.

7. If you own a home, are you paying it off as fast as you’d like?

In Canada the mortgage interests of your primary residence is not tax-deductible, this is very different from the US. Therefore, for Canadians, it makes a lot of sense to pay off your mortgage as quickly as you can. Even for Americans, I believe in most case it still makes sense to pay off your mortgage as quickly as you can.

8. Do you feel you have a good understanding of your investments?

Are you doing index ETF investing? Are you doing DGI? Are you doing hybrid? Or are you doing a bunch other types of investment? Whatever you do, make sure you have a good understanding of your investments.

Can you explain your investments and your investment strategy to a 3-year-old? If you can’t, you should probably simplify your investment strategy.

9. Are your investments working hard enough?

This is why I love doing our monthly dividend income reports. These reports give us an idea whether our investments are working hard for us or not. It’s great to know that your investments are working hard for you, so you don’t have to.

10. Do you have coverage in case you aren’t able to work?

I haven’t written many articles on insurance, but that doesn’t mean insurance is not important. Many people will say their biggest asset is their house. I would argue this is not true. Your biggest asset is… you! You have a ton of earning potentials and in most cases, that money will add up to worth more than your house value.

So make sure you have critical illness insurance and disability insurance.

11. Do you have protection for your family and belongings?

Do you have life insurance to protect your family if you were to pass away suddenly? Do you have a will so your loved ones know what to do with your assets and liabilities? Do you have insurance to protect your car(s) and house(s)?

12. Is your lifestyle the same as it was last year?

If you want to become financially independent or get ahead financially, you need to avoid lifestyle inflation.

Hopefully you know that lifestyle inflation is not the way to be financially sound. It is far better to save and invest the annual raise so you can retire early.


Final Thoughts

These 12 questions are quite basic but if you can’t ace the basic financial test, you won’t be able to ace the more advanced financial tests. Before you move on and plan your quest for financial independence and joyful life, sit down and answer these questions, and make sure you can get 12 out of 12.


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23 thoughts on “How financially sound are you?”

  1. Fun quick quiz there!

    Only if majority of the population would follow this template, they’d all be financially free.

    I got 9/10; I don’t have #10 and #7 doesn’t apply in my situation.

    That being said, #9 can be much better. I just started my journey to financial freedom but I can do so much more.

  2. @Bob an interesting all round post…well done

    13/12 for me…..they missed a question or two, although it was about ‘Coast Capital’ having you as a customer – to selling you services.

    There isn’t any such thing as free money. Money is a zero-sum game unless you have your own printing press & that costs money.

    On #8, “the explaining investment strategy to a 3-year old child”

    Curious how you or others would do this?

    I have my own ideas, but would be interested to know yours & others

    • I think the questions are great for most people. Obviously they probably should have a more advanced questionnaire for more financial savvy ppl.

      I explain our dividend strategy as “see the things we use every day? We own the companies and they give us money regularly for owning them.”

  3. I like Coast Capital and deal with them also. Just make sure you don’t agree to go to a time share pitch in exchange for a free brunch/excursion to shopping mall/piece of cheap jewellery. I’ve read of some excruciating/intimidating experiences.

  4. This is a great overview of questions we should all be asking ourselves on a regular basis (not just occasionally). Like an ocean liner moving slowly through the water, if you don’t check your course often, being one or two degrees off course can mean you don’t end up where you intended. Great post, Bob.

  5. Very cool. What did the person at the branch say? We still dont have a will and have been slacking there. We talk about it off and on and should just do it. Other than that I generally am doing all the others. But not paying off the house fast. Right now i feel the interest rates are so low so might as well get a higher yield in the market. Anyways congrats on your 12/12

  6. I’m curious what they said when you answered yes to all questions, specifically, the investment portion. Like Mrs. Picky Pincher said, nothing is every really free, so I imagine they are getting people in the door for $40 (great amount for 30min of work, good on you Bob!) so they can hopefully “hook” someone for active investments. Little sly on their part, but great for someone like you (us). 🙂

    • Yeah the person asked me who I have investments with. I said TD Waterhouse and Questrade and he immediately figured I’m investment savy so he just briefly mentioned that Coast Capital Savings offers investment options too. I just said I’m not interested. The only thing the person tried to hook me in was mortgage, more specifically rental property mortgage. I just told him that we are not interseted at the time being.

  7. I love this! And I adore that a bank is offering ~free money~ to give this assessment. Although I do wonder if they use it as some kind of upsell for financial counseling, since nothing is really ever free. 😛

    • Yeah they tried to sell me investments but I told them we invest with other institutions, then they tried to sell me on investment property mortgage. 🙂

  8. Those questions are a nice quick snapshot of how you are doing financially. They cover credit, saving, investing, and if you are solvent. As far as surveys go, it is a quick test to identify areas of deficiencies.

  9. I like this list as a quick temperature check for financial stability. We’re at 11 out of 12 with the only “no” being the last question, but that is due to many factors. One year ago, we were living in a tiny place in southern California, battling commuter traffic and far from family and the place we wanted to call home. Fast forward to today where we are living in what very well may be our “forever home” on 10 acres in Michigan (for the price of a tiny condo in SoCal!) and living a more simple, relaxed life. So while our lifestyle is drastically different from last year, I expect to answer an emphatic “yes” next year!

    • If you just recently moved, that makes sense if you said no for the last question. This mostly because you’re still trying to figure out your expenses in a new place. We went through the same thing when we moved from an apartment to a house a few years ago.


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