Nurturing Financial Responsibility with Expert Tips

Parents, teachers, mentors, siblings, and older friends all tout the importance of financial responsibility. Few define what that actually means though. A financially responsible person pays their bills, saves about 20 percent of their income each month, and maintains a clean credit history. That still doesn’t define it; instead, it gives you goals.

What Is Financial Responsibility?

In a nutshell, financial responsibility means living within your means and capably paying for yourself and those who depend on you, such as your minor children or aging parents. The term "means" refers to what you earn each year. It does not include your credit limits. So, when a person lives in a financially responsible manner, they spend less than they earn.

Tips on Establishing Financial Responsibility

Start the process of living a financially responsible life as early as possible. This means working, earning, and saving your money. Establish good financial habits in childhood and teen years that will help you in adulthood.

• Do odd jobs like trimming bushes or mowing lawns, before you reach the age of legal employability in the US (or country of your residence).
• Get an after-school or weekend job once you reach the legally employable age.
• Save at least 20 percent of your earnings in an interest-bearing savings account.
• Create a budget for yourself that includes savings, clothing, extracurricular activities, and entertainment. Consider a line item for post-secondary education (college, vocational, or trade school).
• Stick to the budget. Place 90 percent of any extra money into savings and only spend 10 percent of it on “fun.”
• Set financial goals.

How Can I Improve My Financial Responsibility?

Once you hit the ripe old age of 18, everything changes. You get to vote in elections, graduate high school, and become eligible for credit cards. Don’t let the latter do you in financially.

I recall how excited I became when I qualified for my first credit card. I had no clue how to manage it because I had watched my dad put everything on a credit card and complain about paying it off. In my teens, I did not understand that my mom’s injury in a car accident when I was seven years old had lasting financial effects.

Like most kids, I watched and learned. In my childhood, my parents taught me to save money, so I did. That went out the window when I got my first credit card because I had watched my dad charge everything for years. I did the same and after grad school, used a loan consolidation program to pay my way out of credit card debt. Follow these tips to do better than my dad and I did.

• Make your one credit card a rewards credit card, so you earn money back on all of your expenses. Apply the rewards to your credit card balance, so you pay it off more quickly.
• Use a credit card for regular monthly expenses, so you can earn cash back on purchases. Avoid using your credit card for “little extras” that you could not otherwise afford.
• Note the sentence construction of “a credit card.” Have ONE credit card. You only need one.
• Pay off your entire balance every month. To do this, only purchase what you would normally need to live – groceries, transportation, utilities, etc.
• Continue saving 20 percent of each month’s budget in an interest-bearing savings account.
• Adjust your budget if your financial situation changes for the worse. If it changes for the better, stick with your current budget and save the leftover money. Trust me. You will need it eventually.
• Open an investment account at as early an age as possible. Contribute 10 percent of your income to it each month.
• Establish an emergency fund with at least six months worth of your living expenses saved. This does not refer to your everyday savings account, but a separate account.
• Consult a financial advisor to learn from an expert what you can do to make your situation better.
• Create a no-cost reward for yourself, such as watching an extra baseball game on TV or a once-a-week bubble bath. You earn the reward by sticking to your budget and paying down your debt a little each week.

When Bad Things Happen to Financially Responsible People

Sometimes, despite your best efforts at financial responsibility, something awful happens, and it forces you to spend your savings, and then put something on your well-maintained credit card. I speak from experience, so instead of beating yourself up over the situation, pick yourself up, dust yourself off, and get to work fixing what happened.

So, when I say, do not beat yourself up over your situation and that things happen to the most financially responsible of us, I speak from experience. These tips come from financial articles by experts and from my firsthand experience.

• Prioritize your budget for only the essentials – food, shelter, clothing, credit card payment.
• Make your credit card payment on time every month.
• Pay as much extra on the credit card as financially possible.
• Look for ways to reduce your prioritized needs. (Examples of this will follow.)
• Liquidate what you can if absolutely necessary.
• Start reducing expenses as soon as possible.
• Take on extra work or a second job to pay off debt.
• Stay on top of your finances, so you can stop financial disasters before they snowball out of control. Use a spending tracker that connects to all of your financial accounts, including PayPal, Cash App, etc.
• Stop charging to the credit card altogether until you pay it off completely.

Ideally, you put more money into an interest-bearing savings account each month than you pay on a credit card. Your rent or mortgage should equal 30 percent or less of your monthly take-home pay.

What Are Four Examples of Financial Irresponsibility?

What does it mean to be financially irresponsible? If you catch yourself doing any of the following four things, put yourself in check. That means stop yourself immediately. If you see a friend or colleague doing this, avoid copying their behavior. They are doing it all wrong. Protect yourself. 

1. Trying to keep up with the Joneses. This old American adage refers to people who feel the need to buy what their neighbors buy. If your neighbor puts in a swimming pool, you do not need to do so, too. They do not pay your bills, so what they do does not matter. If you spend money to have what you see someone else purchase, that indicates financial irresponsibility.

2. Ignoring your budget because you really want to purchase something. No Prada or Fendi bag or subscription for football tickets is worth ruining your budget or credit score. Wait until you pay everything off, then save up the funds for the item you want so you can buy it outright.

3. Ignoring financial problems in hopes that they just go away. That is not going to happen, so pay attention to every financial account and handle it. Work more; whine less.

4. Living off of others or borrowing from them, so you can live well or even just get by. Get a job. Instead of asking for money or borrowing from friends and family, get a full-time job and earn your own salary. Live off of that money only.

Insanely Simple Money Management.

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An Example of Handling It

Before I left the city for my cabin, I considered how I could further reduce my monthly expenses, so I could put all of that money toward the credit card debt. Here’s how I approached tightening my budget without doing without necessities.

• I calculated my energy needs in watts, then I purchased two solar panels and a small generator, so I could switch to renewable energy, thus eradicating my electric bill. This equaled an expense of three months of electricity but provided free electricity thereafter. I used part of my savings for the purchase.

• My annual Property Owners Association (POA) dues include well water, which means I paid my water utilities when I paid the POA dues. I'm using this water instead of the store-bought sparkling water that I so love. 

• My groceries currently come from Amazon and Walmart since the kitchen got damaged in the storm. I’m dining on dry goods and canned goods until I complete all repairs. Signing up for Amazon’s monthly delivery service earned a 15 percent discount on groceries. I use Walmart’s cash back program to save on essentials from there.

• Re-slashing my budget after arriving at the cabin helped eliminate another $75 of expenses, mostly from entertainment. I don’t have time to watch TV since I need to make repairs to the house.

I had to split the money I saved by re-budgeting between home repairs and the credit card bill. Although it will take longer than I initially thought, I’m enjoying the sense of accomplishment each time I manage a repair.

And what about work? I applied to three new writing agencies, receiving acceptance for each. Each week, I have written proposals for new contracts, and I’m contacting existing clients to see what they might need. One of those proposals turned into a new book project, which I am gamely attempting to write from the cabin using my data plan.

Conclusion

Regardless of your current situation, you can become financially responsible. That achievement does not mean everything will remain perfect. It does mean that when things do go wrong, you will have the temerity and strength of character to handle it, along with the financial acumen to turn things around. Celebrate those little wins and enjoy becoming a financially responsible adult.

Keep reading Goalry and its publications. Make a continuing education in finance one of your financial goals. Use Budgetry to learn to budget and stick to your budget. Read Cashry to learn how to save on everything from groceries to your cell phone bill. Shop for your ONE terrific cashback credit card using Creditry. Learn to take advantage of tax credits on Taxry. You’ve got one life; make the most of it by living wonderfully within your means.