Of all the important lessons taught in school, being financially responsible is usually not one of them. Sure, you learn how to do basic math and then complicated algebra, but the basic understanding of how to not throw your hard earned money out the window typically is learned in a non-traditional way – if, it is learned at all. For those children fortunate enough to have parents who teach them the value of a dollar and how to save at a young age, then the difficulty and struggle of major mistakes can be avoided later in life. Unfortunately, if a child is never taught, then they grow up to be a parent who never teaches their children and the cycle continues. For so many people their financial debt is a result of poor choices, not saving and bad spending, and it isn’t their fault. If you don’t know any better, than change can be that much harder, especially if a grown adult has spent years making wrong financial choices. But the good news is, it’s never too late to change. Knowledge results in financial success and power. All you need to do is learn a few simple tips and implement them into your daily life. It might be hard to change at first, but your future (and your children’s future) depends on you making this fresh start.
Debt & Credit Cards
To be financially responsible, you must live within your means. You do that by spending less than you make. Debt is a monster. It can suck you in and it takes everything you can do just to keep from being swallowed up in it. Just being able to make a credit card payment is not doing you any favors. The fact that you have a credit card payment at all and are not able to pay your balance in full is an indication that you already spend more than you earn. Having a credit card is not bad. Some of them even offer really great incentive programs that offer cash back and rewards – all things that can save you money. However, responsible use of a credit card means paying the balance in full each month. If your credit is not good, one way to build it up is to regularly make payments on a credit card. Credit cards are debt traps. They should only be used for convenience, not to make ends meet. They can be extremely helpful in an emergency. Being financially successful means you are able to carry a credit card without abusing them.
Act In Your Best Interest
Cutting down means knowing the difference between necessities and luxuries. For example, you need a car, but you don’t need a luxury sedan. Similarly, you need a place to live, but you don’t need a mansion. Purchasing a home in a financially responsible manner means you purchase one that won’t break the bank. Financially speaking, that means your mortgage should not cost more than two or 2.5 times your yearly income. To avoid overspending on your home, put down enough so you can eliminate having to pay for private mortgage insurance (also known as PMI). And, if buying is not in the budget right now, rent until you are able to comfortably able to afford to buy.
For those of us hoping to retire someday, saving is something that we must take seriously. One of the best ways to do this is when you get your paycheck – even before you pay your bills – pay yourself. A fair goal for yourself is to save 10%. This might mean that you have to sacrifice some activities that you are used to doing. But that doesn’t mean that you can’t still enjoy the finer things in life. If you enjoy going to the movies and eating out, look for coupons and online specials. Groupon, Living Social and similar websites are great outlets for finding discounted entertainment. Remember, being financially responsible means being smarter with the way you spend your money. By no means does it mean sacrificing all the activities you enjoy doing. When you spend smarter, you can adequately save for emergencies. Financial responsibility means being prepared for the unexpected. Most experts agree that you should have enough in your savings to be able to support yourself financially for at least 6 months without an income.
The keys to financial freedom are available to you now. Understanding how to be financially successful is not something that should feel alien to you. It’s not for someone else with a better job, someone who can handle more responsibility, someone with less baggage or has had less hardship and tribulation in their life. Knowledge is all the power you need to gain the life you want today and be better than you were yesterday!