How does someone become fiscally responsible? What does fiscally responsible even mean? In this article, you will learn exactly when you are fiscally responsible and how to embody that.
While the term “fiscal responsibility” may not seem too modern, the concept is still relevant. When you become a fiscally responsible person, you will notice you become less stressed.
When you are worried about money, life can be stressful and you can feel overwhelmed. You don’t know if you can pay your bills, your debt is increasing, and it is hard to contribute to your retirement accounts. Getting your finances in order is the last thing on your mind. It just doesn’t seem possible. You need money now.
Break that cycle of money stress and debt by becoming a fiscally responsible person. Let’s go into what fiscally responsible means and ways to get a grip on your finances.
What Does It Mean To Be Fiscally Responsible?
Being a fiscally responsible person means that you have control over your finances. You are comfortable with your finances right now and are working toward an even brighter financial future. Fiscally responsible is also called financially responsible by some.
Besides people being able to be fiscally responsible, it is a term that can also refer to the federal government.
A fiscally responsible government has a plan with their finances, spends aligned with that plan, and avoids a deficit in the federal budget. The biggest question about fiscal responsibility is often a country’s national debt and the government spending.
The last time a country like the United States had a budget surplus was in 2001, when the economy was booming.
The economic growth is measured by a budget deficit, tax cuts on income tax, and surpluses for the fiscal year. When there is a recession, the tax revenue is lower, which can result in spending cuts and a higher federal debt.
In today’s article, we’re focusing on what it means to be a fiscal responsible person, not on a fiscal responsible government.
How To Be Fiscally Responsible
When you are fiscally responsible, you are focusing on both the decisions of today and the decisions of the future. You have a goal where you want to be, and you use small daily steps to get there.
Want to be fiscally responsible? Here are some steps to take:
1. Have A Financial Goal
Everything starts with having a financial goal. When you have a specific goal to work toward, you know WHY you’re doing something. Where do you want to be in a couple of years? Why do you want to achieve these goals?
The moment you want to change habits, it is motivating to know why. It will be easier to stick to your new habits if you know why you’re doing something.
2. Make A Budget
Making a budget is one of the first steps you take when you want to get fiscally responsible and have control over your finances. You can decide what things you want to spend your money on and allocate your budget accordingly.
There are many wants to budget, a couple of which include:
- Simple – the 50/30/20 budget
- Easy – Dave Ramsey’s budget percentages
- For your situation – create a budget that works for you.
Budgeting is a great way to know if your spending aligns with your values. It will be a little bit of work in the beginning, but over time it gets easier.
You will notice spending where you didn’t expect it. Maybe you’re spending $100 more than expected on eating out, or $50 less than expected on gas. Over time, you can finetune your budget and be more aware of where you’re spending your money.
Making a budget will make sure you can live below your means. You will be able to save money and use the leftover money toward your financial goals. Over time, your financial stress will decrease.
3. Save For Your Emergency Fund
An emergency fund is crucial if you want to be fiscally responsible. As a rule of thumb, you should aim for three to six months of living expenses in your emergency fund.
When something unexpected happens, you can take the money out of your emergency fund. There is no need to take on extra debt. It’s such a relief to know you will have enough set aside for emergencies!
You’ll notice that you don’t need your emergency fund that often, as most of your recurring expenses are in your budget.
4. Manage Short Term Debt
While it is best to avoid short term debt, it is hard to avoid debt entirely. The majority of people have some kind of debt, mostly in the form of mortgages.
A fiscally responsible person is aware of their debt and is actively paying it off. When you have made a budget, debt payoff should also be in there.
When you have short term debt, it can be in the forms of credit card balance or car loans. Try to make payments toward the debt with the highest interest rate, and go from there. The faster you pay off the debt, the less money you pay in interest.
If you’re thinking about consolidating your debt, try out CuraDebt. It’s FREE to use, and it won’t affect your credit score! Consolidating your debt often means paying a lower interest rate, which will save you money.
5. Make Extra Money
When you land on this step, you’re already more fiscally responsible than the majority of your peers. Now for the fun part!
There are many ways to make extra money outside of your regular job. My favorite include testing websites, walking dogs, transcription jobs, blogging, and many more! I’ve compiled a list of the best side hustles. My personal favorite is starting a personal finance blog.
You can use the extra money you make as a motivator toward your big goal. What is also a great option is to use the extra money as fun money. Treat yourself without breaking the bank!
6. Start Investing
Many think investing is difficult and complicated. It doesn’t have to be. You can start investing your first dollar in 30 minutes when you’re using the simple systems.
If investing your after-tax dollars is not where you’re at at this moment, you can also invest through your employer. Many employers offer a match program, which means free money!
Get started with M1Finance – A US robo-advisor/broker with no trading fees, no account fees, and you can start investing with any amount!
7. Build Up Passive Income
Investing is one of the many ways to earn passive income. There are many more ways to earn passive income, try some of them out and see what fits your specific situation.
I’m a big fan of peer-to-peer lending and blogging myself. With these courses of passive income, you can work on your financial future. In a couple of months, you will even start to make money while you sleep. Isn’t that the ultimate dream?
Building up passive income will make sure you reach your financial goals faster, and you aren’t relying on just one source of income.
8. Track Your Journey
It is motivating to track your journey and know where you’re heading. You notice you’re coming closer and closer. Whether you want to be financially independent and retire early, or be able to work fewer hours. Let’s be honest, working 8 hours a day is too much.
Track your journey by measuring your liquid net worth and have a specific monthly financial routine. Once you start keeping track of your finances, you won’t stop. I’m tracking my finances for over two years now, and I love it.
[Related read: what is the average net worth in the Netherlands?]
Small Steps To Become Fiscally Responsible
All these steps may seem overwhelming and a lot to start doing. While these steps are the most important thing, here are some small steps that you can take every day.
Read Books To Accelerate Your Knowledge
Reading books is something that can help you gain more knowledge on financial subjects. They can keep you on track, motivate you, and teach you something in the process.
Reading books is what started me off to my financial journey. I can highly recommend it!
A couple of books that helped me:
- Rich Dad Poor Dad by Robert Kiyosaki
- Think & Grow Rich
- The 4-Hour Work Week by Tim Ferriss
- The Law of Attraction by Esther Hicks
Investing is a great way to grow wealth and help you with your financial game. You don’t need to be a financial expert to start investing at all.
You can start by investing your change with Acorns. Every purchase you make, they round up your purchase amount and invest that.
If you would like to invest monthly and use the set it and forget it approach, I can recommend M1 Finance. It is an app that asks you questions to set your investment strategy, and they automate it. For free!
Start Your Side Hustle
The income you receive from your 9-5 will probably be your prime income source. While 40K is a good salary, you can invest more money monthly and work toward your financial goals faster when you start a side hustle.
What you are thinking about what side hustle would fit you, think about the things you enjoy. What do you like to do? What are you good at? There will be some side gigs that you enjoy doing and will give you extra money every month.
A simple way to be more fiscally responsible is to try to negotiate. Every single time you’re making a big purchase, switching jobs, or going on holiday, try to negotiate.
Negotiating is an easy way to save some money that you were going to spend anyway. Whether you’re getting a discount or not, it never hurts to ask!
If you don’t like negotiating or you would rather someone do it for you, try out Trim. Trim is an app that negotiates current subscriptions, saves you money on bills, and cancels subscriptions.
Get The Right Insurance
While insurance isn’t the most exciting topic, it is very important. Specific cases, like entrepreneurs or homeowners, need to be protected against certain risks.
There are many cases in which insurance isn’t necessary, but in some cases it is important. Health insurance, homeowners’ insurance, and car insurance are the most critical ones. Use a free tool like Gabi to compare insurance providers and find the one that fits your situation best.
As you take on more financial responsibilities get older and/or you have a
family, term life insurance can help you out too. With Bestow you can get a
free quick free quote and their prices are fair.
Conclusion – Become Fiscally Responsible
When you’re fiscally responsible, you know what you want to spend your money on. You’re saving money, making more money, and investing the difference.
Being fiscally responsible is not all about saving without fun. It’s about building wealth for yourself and your future generations. It’s about enjoying the moment, but not forgetting about later. It is about making the most of every dollar you spend.
Do you consider yourself fiscally responsible?