After I sent the first “Sorry, going out again this week isn’t within my budget” text, I stepped back and thought, “When did this happen to me? When did I become a penny pincher?” Somewhere along the line you become more aware of your finances, what you spend and where you spend it. If you are still struggling with the whole “financially responsible” part of adulthood, here are a few ways to become more conscious of your money:
Budgeting. Knowing how to budget and setting a budget for yourself are the two most important things when it comes to being financially responsible. When it comes to budgeting, you should have a monthly budget and account for every cent in and every cent out. Stick to your budget and do not overspend. If you do, assess what costs could be cut to better adhere to your budget.
Have an emergency fund. This is almost as important as having a budget. Having an emergency savings account is crucial to being financially sound. If you have a car repair or a medical emergency, you will need money to cover the cost. Instead of getting behind on bills, you can simply have the money already set aside just in case.
Pay your bills on time. Speaking of getting behind on bills, don’t. When you make late payments, it affects your credit score. It will also affect whether or not you are able to get approved for a loan in the future in some cases (for that house you’ll eventually buy). Bills have due dates for a reason.
Check your credit score. You may be shocked to find out what it really is. Those small, stupid things you did when you got your first credit card at 18 or the few bills you ignored when you were in your early 20s can come back to bite you.
Get your debts settled. When you check your credit score, you can get an idea of who you owe and how much you owe. Once you do that, you can create a plan to pay off your debt. Once again, when you go to buy your first house you’ll be thanking yourself.
Live within your means. Live within your means (it needed repeated). Twenty-year-olds spend money on things that they don’t always have the money for (well, not just 20-somethings). To become a financially responsible adult, you’ve got to live within your means. This means that you should not swipe your credit card for non-emergencies (and Thirsty Thursday is not an emergency). It also means that if something is not within your budget, you should not do it. If you plan to take a trip or have a big night out, save money for it.
Save. This is a no-brainer but, in order to be financially responsible, you have to have a savings account. Your savings account should also be set aside from your everyday spending account. Many people have their savings extremely accessible (which works for some people). However, you may find better luck if you place your savings in a separate bank altogether, in an account without a debit card.
Avoid borrowing money (especially from friends and family). Borrowing money is necessary sometimes but it should avoided when at all possible. To be “financially responsible” is to have the money you need when you need it. This is why budgeting, having an emergency fund and mapping out the due dates of your bills is extremely important. Taking money from a lender, family member or friend just adds an additional bill/debt to be paid.
Set goals. Goal-setting is a huge part of becoming financially stable. If you want to buy a house, for instance, you will set a time-frame for when you would like to have a certain amount saved for a down payment on the loan. If you want to save money for retirement, set a goal. No matter what you have your eyes set on financially, set a goal.
Share your goals. Once you have set your financial goal, share the goal with a close friend. This person will help you reach it. A close friend of mine and I always share with one another when we have new savings goals. This way when either of us notices the other one straying from her goal, we call each other out. She will say, “I thought you were paying off your debt, how are you going to dinner for the third time this week?” And I will say, “How are you headed to the bar again? What about your savings plan?” It helps keep us in check.
Whatever way you do it, becoming a financially responsible adult can be difficult. You won’t feel like you’re having as much fun but it will be worth the peace of mind down the road.
When did you finally feel “financially responsible?” How did you get there?
Photo: Flickr: Ken Teegardin