financially responsible

How To Keep Yourself Out of Debt

The concept of responsible money management may be completely foreign to young adults or recent graduates. After all, the urge to splurge once you’ve received your first paycheck is tempting.

And yet, by learning early to save and be financially responsible, you can protect yourself from some potentially devastating financial consequences.

What does it mean to be financially responsible?

Financial responsibility – two big words with more than two syllables in each word are enough to put some people off.

While you may not have fully mastered this skill on your first try, your future (older self) will thank you for learning how to save and track your expenses as soon as possible.

It may sound simple, but it’s actually quite easy to lose track of your spending if you’re not careful. You can consciously avoid spending large amounts of money at once, but many small purchases over time can lead to the same problem.

Here is an ideal checklist of financially responsible behavior.

  • Understand costs and revenues to better budget and ensure all expenses are covered
  • Saves money to cover unforeseen costs that will eventually show up sooner or later with future necessities
  • Has a healthy attitude and outlook on money, has a long-term view, and plans to live within their means
  • Pay outstanding bills and installments on time
  • Manages credit responsibly and is constantly on the lookout for ways to reduce costs
  • Shop around and do enough research when making any financial decision to ensure they are getting the best possible deal for their needs
  • Pursue proactive financial education, including both basic financial concepts and financial products
  • Has a written strategy or long-term financial plan, often created by working with a finance professional

If none of the above is your answer, it’s time to up your money game before it’s too late.

3 money lessons to be financially responsible

Overall, it’s best to start practicing financial responsibility as early as possible if you want a much less stressful life.

Those who do not have a proper long-term financial plan may end up “getting by” with their finances and struggle to cover living expenses and basic needs. And when an emergency finally hits, it can be impossible to get back on track financially.

Here are 3 simple money moves to get you on the path to becoming financially responsible.

1. Secure your finances

To be financially responsible, you must live within your means. This means that you will have to spend less than you earn while keeping an eye on those expenses. Here are some ways to be financially strong:

Start saving – The easiest and most basic method is to simply start saving now. Whether it’s income or an allowance, setting aside a small percentage of your income can help you when unexpected expenses start to arise.

Read more: Here are 3 simple steps to start saving 20% ​​of your income

Track expenses – Although it can be tedious for most, keeping tabs on where your money is going is a good way to figure out how much you really need. When reviewing this data, you might be surprised at how little things can possibly add up. However, it also helps you determine what can be cut, thus saving more in the long run.

Find out – Knowledge is power. Learning how credit, interest, and investing work will go a long way in strengthening your finances. By educating yourself, you will be able to make better decisions such as managing your credit well, having a good credit score and obtaining better interest rates, insurance rates, etc.

2. Understand debt and credit

Credit cards are incredibly convenient and can help build your credit score. However, they can just as easily lead to debt if you’re not careful. If you want to be financially responsible, it’s not enough to make your minimum monthly payment by credit card. Responsible use of credit means paying your account balance in full each month. Keep this in mind when considering using your credit card, as it can teach you how to spend within your means.

Read more: 4 times you should never use your credit card with a 0% installment plan

Also, credit cards should only be used for convenience and never to make ends meet. While it’s entirely possible that you’ll be forced to carry a balance on your card due to emergencies, being financially responsible means limiting your spending until that balance is paid off.

3. Learn to budget

Budgeting is a central pillar of financial accountability. Every successful business knows the importance of understanding its cash flow and balance sheet. The same principle can be applied to individuals. Know how much you have, divide your funds appropriately to cover all necessary expenses, and keep tabs on where your money is going. This way you can make sure all your financial responsibilities have been taken care of before you spend what you want.

Read more: How to start a personal budget

Even then, it would be a good idea to put money aside in an emergency fund. Experts often recommend everyone have at least a six-month supply just in case. If something goes wrong, this emergency fund will at least guarantee that you can pay your bills until you find a solution.

Ultimately, financial responsibility means living within your means, regardless of the level of those means. As such, take a close look at your financial situation, examine and assess your income and spending habits, and make the necessary adjustments to put yourself on a responsible financial footing.

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