Showing financial responsibility.

Being Financially Responsible

Being financially responsible. Quite a boring subject but a necessary one if you are going to have a good life. There are certain things that responsible people do to keep their finances stable. Here are some of the traits of a financially responsible person.

  1. Know What You Are Spending
    So many people have absolutely no idea where their money is going. They get a bill and and pay it. They spend money when and wherever they want without a thought and they never bother to set a budget. This is a recipe for disaster. You need a budget to see where you are spending your money and where improvements can be made.
    Setting your budget is extremely simple, all you need is a spreadsheet program. Every computer comes with a simple one. Set up a spreadsheet and list all of your bills and expenses. Be sure to put your fixed bills and budgets for other expenses like food, gas and entertainment. Then put the monthly minimum of each bill in the next column. You can set the spreadsheet to automatically add the column and list the total at the bottom of the page.
    Once you have all of your expenses listed in an ordinary fashion, you can see where your money is and see where you can make cuts. And, because the spreadsheet will automatically add and subtract, you can see the result of changes to your bottom line. It is as simple as that.
  2. Think About The Future
    Leaving for the now might seem like fun but it is the road to disaster if you never look ahead. You have to plan for the future and for your retirement unless you want to work forever.
    So, what does this mean? It means saving. You need to take a portion of your income and put it towards long term savings and investment. The minimum that you should be saving each month is 10% but a more appropriate savings number would probably be 20%. This is enough for you to build up a suitable retirement fund so you can retire one day.
    Your actual percentage will vary however and you are the one to figure this out. How old are you now? When do you want to retire? What do you want to do when you retire? Answer these questions and then you can figure out how much you need to save out of each paycheck to make it happen.
  3. Set Financial Goals
    You should set goals for your financial future, milestones that you want to reach at a certain point. Where do you want to be in 5 years, 10 years or even 20. Periodically you should review your finances and see how you are doing. Are you on track to meet your goals? If not, make changes along the way to get yourself on track.
  4. Automate Your Savings
    You should take all of the work out of your saving by automating it. Your work can automatically take out your 401K but there is more that you can do. Have your bank automatically make deposits to a savings account and/or investment fund. You can not spend what you never see, so do this on payday. It will remove the temptation of spending the money.
  5. Be Disciplined Financially
    You might see your friends splurging on pricey luxuries but that does not meant that you have to. Don’t try to keep up with people because you do not really know their financial situation. They might make more money than you or they might be deeply in debt. Buy yourself some luxuries but do so only after you have made your savings contribution. A good rule of thumb is that if you can not pay cash for a luxury, you do not need a loan right now.
    If you do decide to splurge on a luxury, add the expense to your budget to see if it works. If not, it would be better to do without or save up a bit.
  6. Carry Only Good Debt
    Debt is never really a good thing but smart people finance responsibly. This means not carrying debt on high interest loans. The biggest offender is credit card debt. If you have debt on a credit card, you are probably paying at least 12% interest and possibly higher. This is an insane interest rate and is taking away a lot of money that could be invested instead.
    If you are carrying high interest debt, paying it off should be your priority before savings. If you have a home, look into a cash out refinance to pay off the debt. The 4-5% you pay on your mortgage will be far cheaper than the high interest you are paying with your credit cards.
  7. Look For The Best Deal
    You should always look for the best deal on everything. You hopefully already do this on major purchases like automobiles but there is more to it. You should also look for the best deal on utilities, auto loan rates, insurance, mortgages and basically everything that you spend money on. A few times a year, do a budget audit and look at your expenses. Take the time to call around and try to get a better rate or contact your current provider and ask for a better one from them. You might be surprised at just how many expenses can be negotiated down.
  8. Care For What You Have
    Taking good care of what you have can make it last longer and allow it to hold its value. Do regular maintenance on your car and protect it by keeping it clean and waxed. A well maintained vehicle will last longer and can be worth thousands more at resale time.
    In addition, take care of your home by doing all necessary maintenance on appliances, especially your heating and air conditioning system. Keep up on the touchup paint to keep wood from deteriorating and keep your home clean. A little bit of maintenance on the property that you own will make it last longer and hold its value
  9. Educate Yourself
    You might not love the subject of finance, but educating yourself on it can pay dividends. Try to read one good finance book a year. It does not take that much time out of your schedule and can pay dividends. Having knowledge yourself will keep you from being at the mercy of your financial advisors.
  10. Know What You Are Worth
    Do not let yourself become complacent in your job. Employers love employees who get comfortable. It allows them to give their employees small cost of living raises each year. It saves them thousands of dollars and in the meantime, they are giving huge salaries to new employees to lure them in.
    Know what employers are paying to attract new talent. it just might be that you have to leave your company to get what you deserve. Keep your resume fresh and shop yourself often.
  11. Make Your Own Meals
    This goes for lunch, breakfast and for dinner. Eating out is expensive whether that be fast food or sit down restaurants. This is money that can be used elsewhere.
    The food you purchase is also never as healthy as what you could make yourself. Eating healthy food will allow you to be more productive, energetic and will actually keep you from getting sick. Don’t know how to cook? Invest in yourself and take a class. Everybody can cook if they just give it a try, it really is not that hard.
  12. Live Beneath Your Means
    Don’t live like a pauper, but try to live a level or two under what you can afford. If you could be in a $500,000 house, settle for a $400,000 one. Drive a Ford when you could drive a BMW. Take the extra money that you could be using to live large and save or invest it. Then, retire five years earlier than everyone and enjoy your life.

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