Have you ever been told you need to be more financially responsible? The phrase “financial responsibility” is often touted as a goal that everyone needs to reach, but what does it actually mean?
Some money decisions are obviously good ones, like saving money for an emergency or paying off your credit card balance in full every month to avoid interest. Others are less clear cut, though, and your personal experience with financial literacy can affect your ability to judge the “right” decisions.
[READ: How Much Should You Save In an Emergency Fund?]
The truth is, there’s no one way to be financially responsible, as the right money moves for one person are different from the next. But there are some smart decisions that are a step in the right direction.
What Is Financial Responsibility?
How do you know when you are being financially responsible if money decisions aren’t always black and white? According to Jordan Gilberti, a certified financial planner and senior lead planner at Facet, it’s about matching your financial moves to your lifestyle and goals.
“Ultimately, financial responsibility is about taking control of your financial future and making choices that align with your values and aspirations. By adopting healthy financial habits and staying committed to your goals, you can achieve greater financial security and peace of mind,” Gilberti said in an email.
Those “healthy” financial habits include some that everyone should follow, while others will vary person to person.
“To some, financial responsibility may mean diligently paying bills on time and avoiding debt, for example. To others, it could involve saving a portion of every paycheck for retirement and emergencies,” Gilberti said.
Financially Responsible Money Moves
Many financial decisions are clearly good ones that lead to a financially responsible lifestyle. If you’re trying to improve your relationship with your money and manage it intelligently, follow these tips:
— Establish a regular source of income. “A good first step to being financially responsible is to develop a cash flow plan,” Gilberti said. You’ll need to have a reliable source of funds if you want to be able to spend them responsibly, so building a clear plan for money in and out can help you get started.
— Get in the habit of saving money, even if it’s a small amount. Gilberti also recommended putting money in a savings account to build the habit. You don’t have to be in a financial place to save hundreds a month to get started — even a few dollars here and there can help reinforce the practice.
— Be strategic about debt. No one wants to be in debt, but sometimes it’s unavoidable. It’s important if you do have debt to prioritize payments on your high-interest ones (like credit cards) so you don’t rack up even more debt.
— Build an emergency fund. An emergency fund is a crucial tool for anyone’s financial security, as it prevents unexpected costs from devastating your budget. Gilberti recommends shooting for three to six months of expenses saved, but even a small rainy day fund can take the sting away.
— Take advantage of “free money.” According to Bobbi Rebell, a certified financial planner and the founder of Financial Wellness Strategies, it’s crucial to take advantage of “free money opportunities. This could be an employee-sponsored 401(k) match or even free benefits from your employer, credit card or memberships.
[READ: How to Create a Saving Strategy]
How to Make Financially Responsible Decisions
Other smart decisions for you might vary based on your particular financial situation, including your current debt levels, income and bigger financial goals like retirement or a home purchase.
If you don’t know what the financially responsible choice is, there are still some strategies you can employ to feel confident you are making the right decision.
First, educate yourself about your finances and the decisions you’ll face. If you’re interested in buying a car or refinancing a home, for instance, do your research with reputable sources before making any decisions that cost you money.
“Don’t hesitate to seek guidance from a certified financial planner,” Gilberti added. “It’s important to have a plan that works for you, and having a professional guide at your side along this journey can be incredibly helpful.”
It’s also important to set personal goals, so that you can weigh your money decisions against them.
“We should also take proactive steps to create a plan that balances your goals with your risk tolerance. Finding that balance is often the biggest variable among different people, and the toughest to navigate,” Rebell said.
If saving for a big purchase is a goal of yours, putting more away each paycheck is the financially responsible decision. If paying down debt is your priority, you might instead direct those funds to your monthly payments. No matter what, knowing what you are working towards informs your decision.
[Read: How to Make a Budget — and Stick to It.]
Financial Responsibility Could Look Different for Everyone
“It’s crucial to recognize that the concept of financial responsibility is deeply personal, and can be influenced by factors such as upbringing, culture and individual values,” Gilberti said.
[Read: Inside the Psychology of Overspending and How to Stop.]
While some might view extraneous spending as financially irresponsible, for instance, taking advantage of investment opportunities or low-cost vacations could be a priority for others.
The same goes for things like credit cards — some find it financially irresponsible to have several open cards with the temptation of debt lurking over them, while others leverage rewards to make cards work in their favor.
Your personal values will guide financially responsible decisions, and remembering there is no one right answer to many money decisions can put you at ease.
As long as you educate yourself, practice some key habits and weigh every financial decision against your goals and values, you can be financially responsible.
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How to Be Financially Responsible — and What It Means originally appeared on usnews.com
