Are you A Financially Responsible Person? Read This.
A Financially Responsible person is the one who looks after his personal finances effectively and efficiently. He learns from other’s mistakes and take necessary steps to improve his financial status.
How does a Financially Responsible person look like? Are you a Financially Responsible person? Let’s see some of the characteristics of Ideal Financially Responsible person:
1. They Avoid Debt
A Financially Responsible person avoids Debt. Even if they are in Debt, they understand the difference between a Good Debt and Bad Debt.
“A Financially Responsible person would want to quickly come out of Bad Debts.”
Even if he is in Debt, the payments should be less than 50% of what he makes. So let’s say if someone is making $2000, the payments to cover Debt must be less than $1000. It’s rather recommended to come out of Debt quickly and have no Debt at all. That’s what makes him a Financially Responsible person.
2. They Have a Budget
Financially Responsible person have a Budget and they already have plans in place, for every unexpected occasion.
They allocate required amount from their salary for different occasions and goals and never mix them with each other. They follow a definite plan and Budget and stick to it.
3. They put at least 20% of what they make in Investments or Savings
Apart from salary, it is important that how and where you invest your money to grow your wealth.
“Financially Responsible person is aware about the different ways of growing his wealth and making money work for him. The best thing money can Buy is more money.”
They allocate at least 20% of their monthly salary to investments and other savings, after paying for themselves. Paying yourself is important as it doesn’t make sense if you are not doing it.
4. They use Credit Card wisely
They know how to use their credit cards. They avoid impulsive buying. Just because you get free money temporarily, doesn’t mean you can use all of it to buy unnecessary things.
“Financially Responsible person knows the difference between his Needs and Wants. They use their credit card just to buy their needs and avoid impulsive buying.”
They pay their credit card bill in full and on time. They consider having an auto-debit option while paying their credit card bills, just to avoid late payments which might cause interest penalties.
5. They follow ‘Less is More’ Principle
They are not materialistic. They buy less stuff, which takes less space and costs less money. It also keeps him organized.
They are free of clutter and prefer free space. This makes them think about new ideas and new ways to take action and increase their Income.
Read this Article on minimalism by Jakob Douglas
Sorry, no life hacks here, just pointing something out. Have some spare time and feel overwhelmed? Organizing calms me…medium.com
6. They Track their Expenses
Financially Responsible person track their monthly expenses and they are very much aware about where each penny goes.
“They track their spending patterns and always find ways to reduce their unnecessary expenses.”
Analyzing spending patterns is important as it shows where our money goes. It’s a small drop of water that consistently accumulates to form a big ocean.
So these are some of the traits of a Financially Responsible person. Are you one of them?
I'd love to hear from you if you have any queries about Personal Finance and Money Management.
Thanks for reading. If you enjoyed this article, feel free to hit that clap button 👏 to help others find it.
Originally published on FinCalC Blog