A financially responsible person is one who takes care of his personal money effectively and efficiently. He learns from the mistakes of others and takes the necessary steps to improve his financial situation. But how do you know if you are financially responsible or not?
According to Investopedia, to be financially responsible, you have to live within your means. To live within your means, you must spend less than you earn.
In an article for Psychologytoday, Nicole Mead, assistant professor of marketing at York University, in Toronto, says the decision for some to save more money is one of the most important New Year’s resolutions. Although most people want to save, they find themselves spending instead. A way to know your overall financial performance is just by answering the following five questions using this scale:
Once every 12 months, once every 9 months, once every 6 months, once every 3 months, once a month.
The first question: How often do you choose to eat at a more expensive restaurant rather than a cheaper one?
second question: How often do you buy something at full price instead of waiting for it to come out during the sale?
The third question: How often do you decide to buy something you want rather than give it up?
the fourth question: How often do you buy a more expensive brand, rather than a cheaper brand?
The fifth question: How often do you go out to eat instead of cooking at home?
If you’re like most people, your answer might focus on “once a month or more” and that’s normal, but some people don’t know the answer because they’re so caught up in spending.
Medium also presents some of the characteristics of the ideal financially responsible person:
Financially responsible avoids debt. And if he has to, he understands the difference between good debt and bad debt.
As good as a mortgage debt to buy a house or in order to complete a college education. But bad or bad debt is the type of debt that we use to buy consumer things, and this creates an unhealthy financial situation.
Even if you owe, your debt payments must be less than 50% of your income. Let’s say you earn $2,000, the payments to cover debt must be less than $1,000.
In general, it is preferable to get out of debt quickly, and not have debt at all. This is what makes you a financially responsible person.
They have a budget
The financially responsible has a budget, and already has plans ready for every unexpected occasion.
They allocate the required amount of their salary to different occasions and goals, and never mix them with each other, they follow a specific plan and budget and stick to it.
save at least 20%
Regardless of salary, it is important to know how and where to invest your money to grow your wealth. The financially responsible is familiar with the various ways to grow his wealth and earn money for him. He allocates at least 20% of his monthly salary to investments and other savings, after completing his own payments of course.
Use your credit card wisely
Credit cards are easy to use because they eliminate the need to carry cash. But just because you get free money temporarily, it doesn’t mean that you can use all of that to buy unnecessary things.
Financially responsible people know how to use their credit cards by avoiding impulsive purchases. They know very well the difference between their needs and desires. In addition, they pay their credit card bill in full and on time, in order to avoid late payments that may cause penalties and interest.
They follow the principle of “less is more”.
Financially responsible people are not materialistic, but they buy fewer things that take up less space and require less cost. They also stay organized.
They monitor their expenses
A financially responsible person keeps track of their monthly expenses and is very knowledgeable about where every penny is going, they are aware of their spending patterns and they always find ways to reduce their unnecessary expenses.
It can be psychologically unpleasant for you to budget and keep track of your finances, but the short-term pain can lead to long-term well-being by helping you save and avoid costly financial decisions.
Financial responsibility means being prepared for the unexpected. Most experts agree that you need to be able to support yourself financially for at least 6 months without income. If you are married you should be able to pay the necessary bills such as the mortgage, food and utilities, from one income, without relying on the income of the other party in the marriage.
Do you have to be stingy?
Does being financially responsible mean you have to skimp and save? Maybe, but only if that’s what it takes to get out of debt.
Ultimately, financial responsibility means living within your means, so take a closer look at your financial situation, assess your earning and spending habits, and make the necessary adjustments to put yourself on a responsible financial footing.