Financial responsibility is the process of managing your earnings/income productively. Being financially responsible is in your best interest and the interest of family because it is the key to a healthy financial life.
In money management, it is important to live within your means. If you want to be financially responsible, you must have the ability to spend less than you earn. I usually say; if you cannot afford it comfortably, don’t buy it.
Someone who is financially responsible is able to look beyond the present needs and make provisions for future needs.
Need or Want?
Your understanding of these words is the first process of financial responsibility. You should be able to distinguish between what you need and what you want.
The things you need such as food, shelter, clothing etcetera are considered essential in maintaining a decent quality life and they should be prioritized in your expenses. Purchases items that are not deemed essential (wants) should be made after fulfilling the needs.
To put this in perspective, needs are the primary requirements you cannot do without while wants are secondary requirements you can afford not to have.
How to be financially responsible
Spend less: Do not spend all the money you earn, no matter the amount.
Save and invest: It is irresponsible to spend every money you earn. You must take savings seriously if you hope to retire someday or to gain financial freedom. The importance of savings cannot be overemphasized.
A good start towards savings is to pay yourself first – remove the amount you will save once you receive your paycheck before expenses.
However, savings alone is not enough, you should find investment opportunities (Not Ponzi schemes) that will earn you money. These opportunities can be investing in the financial markets, real estate, etc.
Read also: Beginners Guide to Stock Investment
Do not rely on Credit Cards: You should reduce your reliance on a credit card for purchases and payments if you really want to be financially responsible. A credit card should not be used to make ends meet; it should be used for convenience. Your ability to pay your minimum monthly credit card requirement without the full payment of your balance is not enough.
Dont buy it if you cannot pay for it.
Budget: you should map out your monthly expenses based on your monthly income and make sure that you stick to it. A review of your monthly budget shows you where your income goes to.
Act in your best interest: You don’t have to keep up with the Joneses. Do not leave in an apartment you can barely afford or struggle to pay the rent. It is not in your best interest. You do not need to borrow to complete your house rent. You need an apartment, but you don’t need a villa or a mansion.
Send your children to schools you afford the fees, buy clothes and shoes you can afford, it doesn’t have to be designers. Leave within your means for your own peace of mind and for a better future.
You don’t have to borrow to buy luxury items you cannot afford. For example, if you need car or a phone, it doesn’t have to be top-notch or the newest model, except if you can afford it comfortably. Buy the items that are within your means.
Do not borrow money to fund your wedding or for a burial ceremony. Similarly, do not spend all your savings on wedding and burial. Invest in your future.
Emergency fund: Ordinarily no one hopes for an emergency but unfortunately, sometimes it cannot be prevented. It is important to be prepared for the unexpected. You should set aside part of your savings for emergency purposes. Having emergency funds will limit your use of credit cards and borrowings for an unexpected expense.
Pay your bills on time: Do not wait until you are reminded or chased around before you bill. Being financially responsible means that, you can afford to pay your bills on time. Early payment of bills reflects positively on your credit score.
The ultimate question in being financially responsible is – are you living within your means? Answering this question is an important stepping stone toward financial responsibility. You can start by evaluating your financial situation and your spending habits. Then make the necessary adjustments.
By: Ifunanya Ikueze