As we get older and take on the responsibility of managing a household’s finances, we realize we need to balance a budget properly and with long-term goals in mind. However, achieving fiscal responsibility proves more difficult than expected for most people, and many people don’t have the knowledge to make the right decisions.
In this article, we will cover:
- What is Fiscal Responsibility?
- Why Fiscal Responsibility Matters
- Political Viewpoints and Fiscal Responsibility
- 11 Steps To Become Fiscally Responsible
What Is Fiscal Responsibility?
Fiscal responsibility refers to the thoughtful management of finances, on any scale, including:
However, fiscal responsibility generally refers to making good decisions that affect the larger picture. Of course, every person’s personal financial decisions play a role.
Someone who makes fiscally responsible decisions finds ways to avoid overspending. They also create a budget process that leaves plenty of room for emergencies and unexpected expenses. Finally, they set themselves up for long-term success instead of temporary success.
Saving money today can mean spending more later.
Ultimately, a fiscally responsible person or business stays on top of the books and manages to keep themselves in a safe position to handle whatever comes their way in the future and leave the most to the future generations as possible.
Why Fiscal Responsibility Matters
When someone makes the first decisions regarding their business, they will find a lot of benefits.
Benefits of fiscal responsibility include:
- Save Money Short-Term
- Save Money Long-Term
- Create a Safety Net
- Support Small Business
Save Money Short-Term
You can save money in the short term by examining your finances and pinpointing areas where you may be spending too much. You can also save money in the short term by staying on top of your current credit to get the best interest rates possible and lowering your monthly bills.
Save Money Long-Term
You can save money in the long term by making decisions that lead to future savings or more income. For example, you can save money down the road by buying energy-efficient appliances or using heavy-duty building materials for your home.
Create a Flexible Budget
You need a budget that allows you to save a little bit of money each month. You will need this money when you don’t have as much income or run into an emergency. This will ensure you don’t need to worry about late fees or find an emergency fund when the time comes.
Support Future Financial Health
When you act fiscally responsible, you help encourage the people and businesses around you to do the same thing. When people need help, they often turn to the government and end up depleting valuable resources necessary for the advancement of the overall economy.
Political Viewpoints And Fiscal Responsibility
“I’m not really conservative. I’m conservative on certain things. I believe in less government. I believe in fiscal responsibility and all those things that maybe Republicans used to believe in but don’t anymore.” ~ Clint Eastwood
Most people associate the conservative party, the Republican Party, with fiscal responsibility. This comes from the tendency to expect citizens to take care of their own finances instead of relying on the government to support them via unemployment, welfare, social security, and other financial assistance programs.
However, some reports claim Democrats are the true party of fiscal responsibility.
One area parties disagree with is health care insurance. Many Democrats believe the government should cover health care costs for the American people, but many Republicans argue it costs too much. In addition, the Republicans don’t want to add to the already excessive national debt level, while Democrats argue the expense will keep people healthy and able to work.
Ultimately, anyone can contribute toward a fiscally responsible household and society, despite their political leanings. Instead of dividing the label down party lines, it can provide better results to clarify which politicians have intentions to make the entire country financially stable or just themselves.
Fiscal Responsibility Around The World
Most Americans consider the United States the wealthiest and most economically stable country in the world. However, that perception doesn’t match most findings. While not struggling by any means, America does owe a substantial amount of debt and doesn’t show the same resilience as some other countries.
All countries will undergo some sort of recession at some point. How quickly they can bounce back plays a significant role in their financial standing and future growth. The most resilient economies in the world are as follows:
For the record, these countries tend to fall on the more liberal side of the political spectrum.
11 Steps To Become Fiscally Responsible
Knowledge equals power. Learn these tips for how to become fiscally responsible so that you can apply them to your own personal and business finances.
1. Stay On Top Of Your Finances
First and foremost, you need to take an active interest in your finances. Start by examining your current income and compare it to what you spend every month. Take note of due dates and set reminders to prevent paying anyone late and incurring late fees.
Next, look for any red flags that stand out to you, such as an exceptionally high cellphone or electricity bill. When you spot this, you can look for ways to reduce the monthly bill.
It would be best if you also stayed on top of all loans and credit card debt. For example, do you know which card has the highest interest rate? Can you avoid high-interest debt by transferring the balance to a card with a lower interest rate? Look into your options to make things as simple as possible.
Also, avoid using the cards with the highest spending level limits.
Finally, you should pay close attention to your credit score. When you have a high credit score, you can get a lower interest rate on any loans in the future. A lower interest rate not only means potentially lower bills every month but also a lower total repayment amount.
2. Design Your Budget To Save
Everyone has more expenses than they would like every month. However, you need to pay your bills. You also need to develop a financial safety net. Lower your expenses every month to ensure you have the ability to save.
You can lower your monthly expenses by making minor changes in your daily routine. For example, instead of paying for lunch every day, try making your lunch. You can also limit the amount of money you spend on going to bars, entertainment, and vacations.
This doesn’t mean that you can’t ever enjoy yourself. However, you want to limit the amount you spend on recreation and luxuries.
You can also reduce your monthly expenses by downsizing some of your daily items. For example, can you live in a smaller apartment or home? Can you buy chicken instead of steak at the grocery store? Do you need premium television channels and multiple streaming services?
Look for ways to downgrade.
3. Get Adequate Insurance
Insurance saves people when something unexpected happens. You probably have health insurance, car insurance, and homeowner’s or renter’s insurance. Many people also have life insurance to cover the expenses of funeral costs. You will also need insurance if you have a small business.
All insurance saves you money. Instead of lowering your insurance plans to save money every month, you need to ensure you have adequate insurance for whatever may happen. If you skimp on insurance, you will end up paying more out of pocket in the case of an accident.
Of course, this doesn’t mean you should overpay, either.
Verify you have adequate coverage on all of the things that matter most to you. You will pay more each month, but the insurance payments will pay off when you need to file a claim. You can also look into bundling insurance, which can help you save money in many cases.
Finally, talk to your insurance company about any other ways to save. For example, you may qualify for a safe driver discount or a senior discount on your automobile insurance.
Be careful to read all of the fine print on the insurance policy you select. Then, when examining your policy, look for ways to adjust it so that you get the most appropriate coverage for the lowest rates without paying for things you don’t need.
4. Increase Income
Ultimately, you probably need to generate enough income to support yourself and the other people or responsibilities you have. For many people, this means increasing their monthly income.
You can increase your monthly income by putting in more hours at work, especially if you get paid hourly. You can also spruce up your resume and look for a better position. Of course, you don’t want to quit until you find something that pays better, and you need to consider how often you switch jobs since many employers appreciate loyalty.
Finally, look into other streams of income.
Some potential income jobs include:
- Driving for rideshare companies
- Selling goods
The bottom line is that the more you work, the more money you will see in your bank account. So don’t sit on the couch and complain – get busy and make money instead!
5. Get Professional Assistance
If you aren’t necessarily the best with finances, you should enlist the help of people who make a living by managing finance.
Hire an accountant and financial planner to help you create something out of the numbers and make the best decisions moving forward. They can point out anything they see as financially risky and put you in a place where you feel at peace with your financial situation and your bank account.
6. Diversify Investments
If you made the decision to invest in the stock market, you could come out on top if you made some wise selections. However, you can also find yourself losing money if you invest in the wrong company.
To minimize the damages, you should diversify your investments. Essentially, this means that you will put your money into multiple different companies so that if one files bankruptcy, you still have some of your money protected.
You also want to look for low-risk investment options with companies with proven long-term financial stability.
7. Shop Around
Some people hate shopping. These people may make the mistake of buying what they need from the first person they find selling it. Take the time to shop around before making a purchasing decision. Y
ou will save a lot of money by simply comparing your options, especially when it comes to big-ticket items or something you will pay for every month.
You don’t need to take up too much of your time. Instead, pick 3 – 4 options and make a selection. Remember that you don’t always want to go with the cheapest option but the option that provides the most value.
8. Plan For Upcoming Expenses
It would help if you considered the expenses you will likely run into in the future and fit them into your budget as early as possible.
For example, if you have children, you need to create a college fund for them as a baby. This way, you won’t feel overwhelmed when they reach their teen years and ask for help with tuition. A retirement fund would also be beneficial. You can also do this on a smaller scale for vacations or work on your house.
Responsible people plan and save for the expenses early on. You should also still leave room in your balanced budget for a savings account. These specialized expenses should fall into a separate savings category.
Thinking long-term by investing in retirement accounts so you have plenty of retirement income even in an economic downturn is essential to being fiscally responsible.
Keep in mind, as you get older, medical expenses can also increase so be sure to plan ahead for these spending necessities.
9. Avoid Borrowing
You want to avoid borrowing money as often as possible. When you borrow, you put yourself in a position of paying more due to the interest that will accumulate. If possible, you should pay for things out of pocket.
Some items, such as a house, require a loan most of the time, but you can always put down a large deposit. If you run into an essential expense that you can’t afford, pay as much as you can to reduce the amount you have to borrow.
You also want to avoid borrowing from friends and family as much as possible. This type of outstanding debt can lead to contention if you struggle to pay them back in a timely manner, and they will have something to hold over your head.
Fiscal responsibility has a lot to do with independence, so cover what you can and save for the rest.
Avoid borrowing money you can’t pay back to avoid a long-term debt problem.
10. Go Green
Many people want to help save the planet. That’s a great cause, and we should all encourage environmentally-friendly efforts as long as they don’t interfere with jobs or cost more than we can spend. The good news is that many green efforts also help promote fiscal responsibility.
When you decide to use environmentally friendly appliances in your home, you reduce your carbon footprint while saving money on utility bills every month. It’s a win-win situation. Just keep in mind that some efficient appliances may cost more upfront.
You can also save money by switching to paperless transactions wherever possible instead of printing and filing paperwork unnecessarily.
11. Make Long-Term Decisions
When you want to be fiscally responsible, you need to consider the long-term financial impacts of your decisions. This refers to both consumer decisions as well as personal decisions.
For example, avoid wasteful spending by making purchases that give you great value. This means you won’t need to replace them over and over again.
Another way to focus on long-term growth financially is to invest in yourself on occasion. People with a college degree make significantly more than people without one (on average). Look into your options about going back to school. Yes, you may inquire some student loan debt but it can lead to more income down the road.
If you run a small business, you may need to invest in your company to generate more sales. Look into what marketing techniques provide the best return on your investment. It would help if you also looked into what equipment can help you run things more efficiently, saving you money in operational costs.
Wrapping It Up
Now that you know how to be fiscally responsible, you need to make some changes where necessary.
For example, it would be best to use splurges as a reward for reaching specific financial goals instead of making them a part of everyday life. Then, when you see yourself achieving your primary goal, you will enjoy your reward but come back ready to work harder and do even better.
We all have a responsibility to contribute toward economic growth, and it starts at home by managing your own finances. Hopefully, politicians will learn how to do the same.