The Basics of Financial Responsibility

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Financial responsibility has become a buzzword of sorts. It gets tossed around a lot – ”you need to be more financially responsible!” – but what does it actually mean? And how do you do it?

The thing about financial responsibility is that it looks different for everybody. There are a ton of factors that contribute to your personal financial responsibility, and even more resources out there to help you achieve that.

But you don’t need to go running to the nearest bookstore and drop hundreds on the latest financial wisdom novel – seems kinda counterproductive if you’re trying to save, doesn’t it?

In this article, we’ll break down what financial responsibility is and different actions you can implement today that will help you become more responsible with your money at no extra charge.

What is Financial Responsibility?

Asking what financial responsibility is can get complicated. All over the Internet, you see people talking about how financial responsibility is creating an air-tight budget and sticking to it, or spending less than what you earn, or putting aside 20% of every pay check. And they’re technically not wrong – all of these things are part of it!

But the answers boil down to something even simpler – financial responsibility is being able to afford to take care of yourself and the people who may rely on you (think aging parents or kids). 

Sounds simple, right? 

Not always. A lot of Canadians struggle with financial responsibility. In fact, the average Canadian debt is $23,800, not including mortgages. This number is expected to rise due to COVID-19, and includes credit card balances, line of credit use, and unpaid loans.


A woman sitting at a desk demonstrates financial responsibility by counting her cash and recording the balance in her note book

Top 5 Tips for Financial Responsibility

With such a large number as the average Canadian debt, it’s clear that financial responsibility is something that is easier said than done.  

It’s important to take small steps you can tackle and slowly improve! If you make small lifestyle changes, you’re more likely to stick to them long term – and financial responsibility is as long term as it gets. 

Here are some simple tips you can implement today to improve your financial habits.

Plan Ahead

Circumstances change as you go through different stages of life. Your financial needs as a student living at university are completely different than a parent of two! 

But while you’re in one stage, it doesn’t hurt to keep looking forward! There’s a reason they say “when you fail to plan, you plan to fail”. If you’re not planning ahead financially, it’s harder to succeed. 

So what does this look like? While you’re making financial decisions today, you need to consider what future you needs also.

For example, do you really need a brand new $1,500 phone or is yours still working fine? Could you put that money into an account where you’re saving for a new home instead?

Here are some examples of what to consider when planning ahead financially:

  • Finishing up school? You may want to start putting money aside for your future home (rent or a down payment) as soon as possible. The cost of having a roof over your head should be your largest monthly expense, so it’s important to start saving for this early 
  • Even in your first job out of school, start planning for retirement! It may seem far off, but start putting a little bit of money into a Registered Retirement Savings Fund now so you can retire comfortably 
  • At the risk of sounding like your parents asking when they’ll be a grandparent, you should start thinking of the costs of raising kids as a newlywed – or even earlier, like once you’re engaged or in a serious relationship! It’s generally estimated that it’ll cost you up to $15,000 a year to raise a child until 18 years of age, so start putting aside money for childcare or education early.

When you recognize what you need to prepare for in the future, you can better plan ahead! You can even go to your bank and have them build out separate savings accounts for each of the areas you want to save for. It’ll be motivating to look at each account and see your savings grow for each goal!

Ask Questions

Nobody expects you to have financial responsibility mastered, no matter what age you are! It’s something people have to constantly learn, so make sure to ask questions about it. 

How much of your paycheck should you save? What type of account should emergency savings go into? How much should you put into an RESP for your kids? These are all important questions to ask about finances – and the more you ask, the more you’ll know.

There are also a ton of resources available nowadays. Talk to loved ones who have faced similar financial questions, book a meeting with a financial consultant at a bank to walk through account options, or even a quick Google search!

Asking questions early – and not when you're already struggling through these stages – will help set you up for financial success as you reach each of these milestones. 

Make a Budget

Being financially responsible doesn’t mean no eating out, trips, or big purchases, it just means properly saving for these things so you can enjoy them – without a maxed out credit card!

Creating a budget will help you feel more in control of your finances while saving for those fun purchases. If you’re not sure where to start, here are some simple steps to create your own budget

  • Figure out your net income: How much are you bringing in each month? That’s where you’ll start your budget. Make sure you account for taxes or other deductions so your budget isn’t made guessing too high a number. 
  • Track what you spend: Give yourself a month to track where you’re spending money normally. This will help you gauge what you have to include in your budget
  • Set some financial goals: Set some for the short-term and long-term – having achievable short-term goals is key to sticking to your budget. Those small wins – like putting aside enough for a weekend getaway – make it easier to stick to your budget for those longer term ones
  • Plan out your budget: Now you know what you spend, where, and what you want to save for! It’s time to start building out your actual budget. Put numbers to each budget line you have (like rent, utilities, fun money, groceries, or anything specific to you) and deduct them from your net income. You’ll also want to add deposits to savings or emergency funds to this. Your goal is to balance your budget and spending by the end of each month!

Once you have this broken down, go forth and spend responsibly – no need to waste money!

Pro tip: There are a ton of amazing apps like Mint or EveryDollar that will make budgeting even easier! These apps can connect right with your bank account to give you a monthly report of your spending. You can also manage your budget right from your phone by inputting what you spend. It will show you a remaining balance for each budget item. 

This calculator resting on top of a budget statement represents two key components of financial responsibility

And Know How to Stick to A Budget

A budget is only as good as your ability to stick to it. When you know how to stick to a budget, you’ll have way more success. 

But creating your budget is arguably the easier part of things. Your budget is your plan. Sticking to it is really taking action towards more financial responsibility.

But this can be hard, especially if you have spending habits you’re used to that you need to break. Here are some tips on how to stick to a budget:

  • Remember your budget isn’t set in stone: If after a month you realize your budget really isn’t working, revisit it! You want to make it work for you – it's okay if that means if that means saving a little less each month! Make sure it works for you so you can stick with it. If it’s not working off the get-go, you won’t stick to it
  • Set small rewards – within your price range, of course: Stick to your budget for a week? Treat yourself to something fun (within your fun budget!). Or put aside a certain amount of money each week to put towards something you don’t need but definitely want. Everything is more fun when it’s incentivized!
  • Talk to your friends about it: It’s easy to get caught up in spending, especially on activities with friends. Be honest with your friends about your budget so you can all do activities within your budget. Nobody feels left out and you don’t feel pressured to spend more!

Be Smart with Credit Card Use

Credit card use is a double edged sword. When used responsibly, they can be a wonderful financial tool. 

If used recklessly, credit card debt can be crippling. 

But for most, credit cards are the norm, so it’s important to be intentional about how you use them. Here are some tips for smart credit card use:

  • Use your credit card for needs, not for wants: This will help you not spend on small things without thinking about them
  • Get a rewards card: If you’re using a credit card, you should reap some benefits! Think about it this way: if you’re putting your needs and fixed expenses on a cash back credit card, you’re essentially receiving bonus cash! It’s money that you would have to spend anyways, so why not reap benefits.
  • Pay off your balance: Getting into the habit of just paying off your minimum can be costly – literally. If you carry a balance, interest is added based on the balance you carry. And it may seem small at first, but that interest will add up fast 
  • Stay under 30% of your limit: The 30% rule has some skepticism around it in regard to its impact on credit scores, but it’s still not a bad rule to follow. When you put a cap on your own credit card spending before you’re maxed out, it’s easier to avoid carrying a balance  

Final Notes on Financial Responsibility

Just like fitness or learning a new skill, financial responsibility isn’t a one-and-done thing. It takes work and the more you practice it, the better you’ll get! The first month of your budget may be rocky, but it gets easier.

So stick with it! Financial responsibility may be hard at first, but it’s always worth it. 

Laura McKay

COO & Co-Founder

About the Author

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