What do you mean by financial responsibility? It’s a very big and complex question to get the right answer, but the fact is simple. In order to financially responsible you need to take care of things within your reach. To be in your reach you must spend less than you make.
Table of Content
- Credit Cards and Debt
- Consider the Interest
- Acting in Your Own Best Interest
- Paying Yourself First-Saving
- Emergency Fund
- Final Word!
Credit Cards and Debt
If you want to be responsible for finances and think you are able to do so by thinking you are able to pay your monthly credit card payment, does not really support. The real fact is you are not able to pay your expenses in full because you are already spending more than you make.
It is considered responsible use of credit card if you are able to pay your monthly payment in full every month. It is advisable to use credit cards as a convenience not to make a need for it. Credit cards help you in not to carry cash.
A credit card is very helpful at the time of emergency but this also forces you to carry balances as spend could be more than you make monthly. Living financially responsible means you need to understand your sending limit and capacities.
Consider the Interest
It is great to draw your attention to the interest rate because you are paying interest means, paying more of the product or services than the actual purchase price.
Sometimes it can look convenient to purchase products or services and pay interest but the price you are paying is more than the manufacturer’s ever thoughts of for the same. It should be your goal to avoid paying interest on anything.
However, in some cases, it is unavoidable to pay interest like buying a home or some other loans for most of us. If this happens, you should minimize the interest to the best in each month.
Acting in Your Own Best Interest
It can be easier for some people to cut down the interest and borrowing money than as said. In practical life, it is possible to know the difference between necessity and luxuries. For example, you might need a car but not the topmost model of the car you required other than you can able to pay for it. In other cases you can say having a home is good but you need loans for the same, so make sure this will not cost you more than you can pay back easily.
Paying Yourself First-Saving
If you are spending each and every penny your earn is simply irresponsible until you have too many funds to spends that will never end. For many of us, it is important to start saving if want to retire someday.
To get started with the saving scheme you need to pay first yourself before paying your bill when you get a paycheque. It can consider a good goal if you can able to save up to 10% of your earning.
When it comes to saving, investment in stocks or other investment options could be the most beneficial. There is risk involved in the investment but when you take the calculated risks can be good sometimes. To act as financially responsible, you create a good plan and work on it.
The meaning of financial responsibly is to be prepared for the unexpected things in life. So many finance expert says you should be able to support yourself at least for 6 months in the time of emergency without any income. So, it is most important to keep emergency funds.
What does this mean to you? This means if you have to pay all your utility bills and mortgage, food with one income or no income. This is time you need to create an emergency fund to cope up with the time.
It is said to have a plan or budgets is great to have financial responsibility. You should have all the necessary understanding of where your money is being spent.
Business owners know the better importance of cash flow and balance sheet. For example, every successful business has a plan or budget and they work on the same.
You may like to Read: 7 Reasons Why You Should Invest In Physical Gold
At last, being financially responsible means living your life within your reach, without being influenced by the level of means. It is important to take care of the current situation of your finance and act accordingly.
You must consider and analyze your earning and spending habits to come up with better plans/budgets that can make you financially strong and responsible.
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Let us know your thoughts on how to become financially responsible in the comments below.