Why it’s important to take control of your finances — and how you can make the most of your money.
So, what exactly does it mean to be “fiscally responsible”? Typically, the term “fiscally responsible” is used in politics, referring to the expectation that elected officials should fundraise, allocate, and spend money appropriately. Essentially, this boils down to sticking to a budget.
When it comes to individuals, fiscal responsibility means behaving in a way that makes the best use of your money.
Why is it Important to be Fiscally Responsible?
Being fiscally responsible entails taking control of your finances — and if there’s anything that’s important in life, it’s knowing how you’re spending your money.
When you’re a fiscally responsible person, you’re able to control what you can and plan for what you can’t, creating a vision for the future that you can achieve — despite the unexpected hurdles life may throw your way.
How to Be Fiscally Responsible: 8 Tips
1. Build a Budget
First, establish a budget that is realistic for your lifestyle while also ensuring that your spending doesn’t exceed your income. Moreover, a good budget is one that accounts for saving, too.
While there isn’t one set budget to fit everyone’s goals, think carefully about your habits, any loan payments you have, and other monthly recurring expenses like therapy, car insurance, and rent when establishing your budget.
Just as government officials are expected to maintain the budget of the government, hold yourself to the same standards and maintain the budget you set for yourself. Only by sticking to a budget can you save for other goals, like graduate school, buying a house, or that dream vacation.
2. Track Your Spending
While building a budget is the most important step, it’s also essential to track your spending. Know where your money is going and cancel any subscriptions you don’t use or cut down on other expenses where you can.
A fiscally responsible person knows exactly where their income goes and tracking your spending for 1-2 months can help you establish that.
3. Establish Emergency Savings
It’s all well and good to save for a vacation or new pair of shoes, but it’s also important to have an emergency pool of savings to draw from, when needed. Whether it be an economic recession or an unexpected accident, there are always unforeseen ways in which you’ll wind up spending more or saving less in particular months.
That’s why contributing to an emergency fund, first, is important as it allows you to draw from a savings pool without compromising on your longer-term goals and, further, without stress — since you’ve already set the money aside for emergency situations.
4. Pay Your Debt
It’s tough to be fiscally responsible when you’ve still got debt to pay off. From refinancing your loans to setting up a debt payment plan, there are numerous ways to get your debt under control.
It’s never too early to think about retirement, so take advantage of a company 401(k) match or set aside money for retirement on your own using an IRA or other retirement fund. Your future self will thank you.
If you have more money to set aside after retirement, an emergency fund, and paying off your loans...invest! There are numerous resources online, from YouTube to Reddit to good old-fashioned books and podcasts, that can help you learn how to invest your money in stocks and mutual funds.
Learning more about personal finance and taking charge of your money is an empowering journey, but you can also always rely on a financial planner to assist you in your investments, too.
7. Get Insurance
Fiscally responsible individuals are prepared for most unexpected situations, which includes being insured — whether through healthcare (especially in the United States), homeowners or renter’s insurance, or car insurance. It’s worth spending money to ensure that your health, home, and belongings will be safe if the unexpected occurs.
8. Use Credit
Finally, don’t fear credit. Embrace using credit responsibly, paying your credit card debt on time and reaping the rewards of credit card perks. Also, get used to checking your credit score and ensuring that it's strong.
If you’ve mastered these, then you’re fiscally responsible! And even if you’re still on the way to getting there, what’s important is recognizing that being fiscally responsible is an achievable and essential goal on your personal finance journey.
Keertana Anandraj is a recent college grad living in San Francisco. When she isn’t conducting international macroeconomic research at her day job, you can find her in the spin room or planning her next adventure.
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