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.
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.
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.
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:
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!
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.
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
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.
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:
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:
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.