7 Fiscally Responsible Tips To Save Money and Grow Your Wealth

You’ve probably heard the term countless times: As an adult, you should be fiscally responsible. It means good with your money, right? Well, yes and no. 

Fiscally responsible certainly means responsible budgeting and adhering to the basics of personal finance. But it also means much more than that—fiscally responsible means preparing for financial emergencies and your financial future.

As such, let’s look at fiscal responsibility and how you can be a fiscally responsible person with your personal finances.

Build an Emergency Fund

One of the critical tenants of being fiscally responsible has nothing to do with paying down your debt, how you spend your money or lowering the interest rates you pay. 

Indeed, a good part of protecting your future financial health is all about preparing for emergencies, including an economic downtown such as preparing for an upcoming recession, an unexpected expense, or abrupt job loss. To become fiscally responsible, you must establish emergency savings.

What does this mean? If you abruptly lose all of your income, you must have an emergency fund that will allow you to pay basic expenses until you can reestablish yourself. It means, quite simply, that you will be able to live. Emergency funds can help you do so in the event of an economic downturn. Indeed, an emergency fund is one of the most critical components of properly caring for your finances.

How big of an emergency fund should you have? It’s tough to say, but experts generally advise that you build 3-6 months of expenses that you can access at any time. Remember that you don’t need 3-6 months of your expenses today. Instead, build out a budget that would be 3-6 months of the essential expenses, including rent, food, gas, etc. The budget would assume that you would cut out any expenses that are not truly necessary, like eating out or traveling.

Not only can this emergency fund help ensure that you are prepared to deal with unemployment potentially, but it can also help to ensure that you are prepared for a significant and sudden expense. 

One of your chief financial goals needs to be able to afford such unexpected expenses, and an emergency fund can help you get there.

Protect Yourself and Your Family

Being fiscally responsible means not only protecting your own financial future but doing so for the sake of your family. One of the most common tragedies in the world, from a financial perspective, is when a person who is the primary breadwinner dies, leaving behind a financially endangered family. You must protect yourself and your family if a similar tragedy occurs.

What does this mean? Consider the following:

Develop an Estate Plan

An estate plan is not limited to passing generational wealth to your children. It means that you have a will that lays out who gets what. Also, you plan for what will happen to your children in the tragic event that something happens to you and your spouse. Consider a revocable living trust if you live in a probate state like California.

Accessible Financial Information

Ensure you leave behind all financial information on any bank account, savings account, investments, and more. It ensures that your survivors know where your money is and how they can access it.

Insurance

Make sure that you have all of the appropriate insurance. It includes health insurance, homeowners insurance, disability insurance, car insurance, and more. Remember, even if you live in a rental property, you still need renter’s insurance to protect your belongings.

Often health insurance might not cover all expenses, so have a health savings account (HSA) to pay out-of-pocket healthcare costs. HSA provides a triple tax advantage so ensure your funds in the HSA are invested for growth. Not all HSA accounts have investment features.

Monitor Finances

You also want to make sure that you are regularly monitoring your finances. Check your checking and savings accounts periodically and ensure that you don’t see any transactions that don’t belong and that only authorized users can access the account.

Also, transfer unused cash to safe investments such as a high-yield savings account.

Monitor Credit Reports

You should also regularly check your credit report for any fraudulent activity. Even if you have excellent credit habits, identity theft and errors in credit reports can cause your score to tank, and you might not even know about it. 

If you do not have an excellent credit score, follow the Credit Karma recommendations on improving your credit and thus reducing your debt. All of this can help you save money and provide for future growth.

Start Investing

Figuring out how to invest money can be overwhelming, especially if you’re a beginner. Knowing where to start, what to invest in, and how much risk you’re comfortable taking on is challenging. 

Several income-producing assets have different returns, risks, and volatility. Before investing, take a step back, ask yourself “why,” and define your financial goals.

Learning how to start investing in stocks should not be difficult with the advent of low-cost index funds. In fact, investing in the S&P 500 has provided adequate diversification and asset allocation with a blend of growth stocks and value investing.

There are several ways to invest in real estate, including real estate investments with little to no money.

Many of these involve sweat equity, such as fixing and flipping homes. Or wholesaling houses. Or using the BRRRR method. 

One can get passive income from real estate by becoming a landlord. Because of a small supply of available rental homes, rental prices are increasing. Understand the real estate metrics used to evaluate a rental property. Since one must maintain rental homes, it can take some hands-on work to be a landlord.

Many investors who like real estate don’t want to be house flippers or a landlord but want to invest in real estate. Investors can buy real estate investment trusts (REITs) that invest in real estate.

Real estate crowdfunding or farmland investing are other options to invest in real estate passively.

Pay Down Your Debts

The simple fact of today’s financial world is that the vast majority of us have a debt of some type. Debt comes in many forms, and there are vast differences in the kind of debt we have.

Some kinds of debt occur as part of life and are extremely difficult to avoid. It includes student debt (college loan debt), car loan debt, or mortgage debt. Most people will lack the financial resources to afford college, an automobile, or a home without taking on debt. This kind of debt is normal, acceptable, and manageable.

Fiscal responsibility means making your payments on time. As such, it is incumbent upon you to ensure that you keep an eye on these debts, refinancing for lower interest rates whenever possible, and never miss a payment.

To be clear, you should try to pay down your student loan debt as fast as possible. It will free money up and allow you to invest in other priorities. Keep in mind that some states will enable you to write off the interest you pay on student loan debt, and you can also write off the interest you pay on your mortgage as a tax planning strategy. Thus, it would help if you tracked all of your student loan debt payments.

Other consumer debt — like credit card debt — can be more problematic. In these cases, you make purchases with your credit cards and cannot pay off your credit card debt. Balances on credit cards are high-interest debt, as credit card companies make their money by charging you high-interest rates.

In such instances, your monthly expenses will soar, and you may be unable to save money. One of your chief goals should be to pay down this debt and reform your spending to avoid going into credit card debt in the future.

Plan for the Future

Make sure you monitor your kids’ future and start a college fund as soon as they are born. It protects their financial and educational options and allows them to do what they want with their financial future.

A retirement plan is one of the top things you can do to be fiscally responsible. Even if you have no plans to retire early, the ideal fiscally responsible person constantly keeps their eye on the future. They are prepared for when the day comes that they are either unable to work or choose not to work.

In these instances, you’ll have to invest in an investment account to create retirement income. Thankfully, there is no shortage of investment vehicles that will allow you to save for the future or investments for monthly income.

Many retirement accounts are tax-advantaged, as the federal government has created tax incentives to encourage people to invest in their retirement. This will allow you to earn a return on investment at a healthy interest rate, thus ensuring that your retirement savings will last well into the future.

Building a retirement fund need not be very complicated. There are many investment vehicles, but some are more appropriate than others. Deciding when I can retire is based on my nest egg and the social aspects of the retired lifestyle.

Furthermore, you can and should work with a financial advisor to ensure your retirement accounts achieve long-term growth.

A retirement advisor can help ensure the growth of your investment. They can also help with other vital financial services, like building an estate plan for you and your family. They can also help you identify specific stock market solutions or mutual funds that will allow you to grow your income.

It is also worth keeping in mind that you may work for a business that provides a company match on a retirement investment, like a 401k. Indeed, this is a common benefit of working in the private sector. Not taking advantage of a company match means you are ignoring free money and losing the chance to gain interest in your retirement account during economic growth. Do not make this mistake!

Remember, the primary goal of such planning is to ensure that you do not outlive your income and build a budget that allows your money to last. It requires expert knowledge and services, and a financial advisor can be beneficial here.

Create a Budget

One of the most important things you can do is build a budget that allows you to track income and where you spend money. Tracking this information will enable you to create a balanced budget that ensures you are not spending too much.

It will also allow you to identify all income and expense sources accurately. From there, you can target spending categories specific to your financial situation.

Remember, a budget process can help on both sides of the coin. On the one hand, they can help you figure out if you need more money to live the life you want. It can help you figure out what ways you can use to generate passive income.

For example, let’s say you wanted to increase your current income. Building multiple income streams can help improve your current income, but it isn’t easy to know if this is necessary without a more in-depth examination of your budget. Knowing how much extra income you need to generate can only happen if you create a budget that lays out exactly how much money you have coming in.

Second, a budget can help you identify other expenses and find where you spend money. By tracking how much money you spend, you can avoid overspending and ensure that you are using low or no-interest spending solutions, like debit cards.

You can also make sure you are concentrating your spending on essential expenses, building an emergency fund, and saving for retirement. It can ensure you don’t run a budget deficit and can pay your monthly bills.

Several budget templates are available, and the 50/30/20 budget rule is easy to implement.

Monitor Government Policy

Like it or not, elected officials in government – and their policies – can majorly impact your financial future. As such, being fiscally responsible often means watching the broader political and economic environment to ensure that you protect your financial interests.

What does this mean? You don’t have to be a financial expert, and you don’t have to watch CNBC extensively. But some things are worth watching. This includes:

Make sure you understand how government spending and the national debt can impact items like monetary policies. Investing during a recession can seem scary and make you wonder, “should I sell my stocks now.”

Analyze how the federal government’s fiscal policy can impact your bottom line. Rising interest rates can impact fixed-income investments such as long-duration bonds. Bond funds do not do well in a rising rate environment, but I Bonds offers rates matching inflation with some premium for the lack of liquidity.

When your local, state, or federal government decisions can impact the amount of money, you ultimately pay. For example, the H.R.5376 – Inflation Reduction Act of 2022 provides electric vehicles and solar panels incentives. Instead of figuring out how to save money on gas, you can plan for your next car.

Section 13301 of the Inflation Reduction Act has energy-efficient home improvement credits based on annual limits of $1,200. Factor those when deciding whether it is a good time to buy a house and break a project up over multiple years.

Watching government policy and understanding how it impacts your fiscal responsibility can be challenging. This is why it is often worth working with a trained financial professional who gets paid to keep an eye on the news, then reacts accordingly.

Becoming a Fiscally Responsible Person

In these uncertain times, it is more important than ever to be fiscally responsible if you want to save money and grow your wealth,

As you can tell, defining fiscally responsible can be challenging. There’s no magic pathway to becoming fiscally responsible. Instead, it involves a series of steps that are all oriented around the same basic idea:

• Limiting consumer debt
• Preparing for a financial emergency
• Looking forward to the future
• Seeking financial guidance from experts

While the pathway towards fiscal responsibility can be long and arduous, the journey is unquestionably worth it. 

Fiscally responsible people have extra money to invest in priorities and experiences, limit bad debt, and can enjoy their life.

Plan ahead, you will reap the rewards, and your future self will thank you. Ultimately, it is through fiscal responsibility that you can plan for your future.