The only way to create a stable financial base and accumulate wealth is by being financially responsible. Financial responsibility is all about prudently managing the money that comes your way to help you meet your obligations and still have some to save.
Experts say that financial responsibility starts with the ability to live within your means. This is all about making more than you spend.
“Living within your means allows you to save, and this is the first step towards creating and accumulating wealth. Ability to save is an indicator that you are financially responsible and people who take saving seriously are surely on the right track towards financial independence in future,” says Henry Gambo, a financial expert.
But Gambo cautions, “Establishing a saving routine is not easy. You must come up with short and long term goals that will help you achieve what you want. Good planning is key to saving even when the cost of living is high.”
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Experts say unless you have inherited some wealth, creating wealth is about growing your income or reducing your expenses. However, the growth of your income is not spontaneous as you must overcome the challenges that hold you back, which happens only when you are financially responsible.
“You should focus on outgrowing the challenges that could be holding you back. If you are working, get paid for what you do. When what you are taking home is not enough to take care of all your needs, use it well by developing good money-management skills that will save you money,” says Gambo.
It always takes a good deal of commitment and sacrifice for you to achieve financial independence. But when you are financially responsible, many benefits can come your way and may overshadow the short-term setbacks you may have faced.
“Having a personal budget is one of the critical ways to show that you are financially responsible. An accurate budget allows you to know where your money is going, which in turn will give you the ability to calculate exactly how much you can afford to set aside for savings.”
“When setting your budget, determine how long it is going to cover. It could be daily, weekly, monthly, quarterly or yearly. Most people prefer to make a monthly budget as this is when most bills are paid,” he advises.
Experts say you need to work out how much you make for the period you are budgeting for. Your income may include salary and any other supplementary income like part time jobs, investments and other income sources.
When you establish how much you are taking home, you will be required to figure out how much you are likely to spend over the period you are budgeting for. How much are you going to pay for food, fuel, travel, entertainment, rent and utility bills?
The ability to keep good records is another indicator that you are financially responsible. For many people, this is the hardest part as they forget to keep track of their income and expenditure for an indication of whether or not they are living within their budgets.
Many financial experts advise people to plan for the unexpected as an important step towards financial responsibility. Emergency funds will cushion you against the unforeseen, like an accident or loss of your job.
Your financial worth is equivalent to the number of months you can stay without a regular income.
Financial responsibly also means the ability to meet all your financial obligations. You should be capable of taking care of your family and pay your bills on time.
Failure to meet some of these obligations is an indicator that you are also unlikely to have money to save and create wealth, say the experts.
Says Gambo: “To realise this, you need to have set clear goals. Determine how much you will set aside each week or month in order to reach the goal in a reasonable amount of time. The amount of money you save should be guided by your financial goals. Be realistic and save what you can afford.”
There is no way you can accumulate wealth when you do not know how and where to keep your money. You may decide to invest in land or stocks, or open a bank account, which can help you manage finances.
A savings account can provide you a safe and suitable place for you to keep your money for later use. Before opening the account, determine the monthly fees and charges. Also find out the interest payable on your money.
To show financial responsibility, you must be able to keep debt at bay. Debts can easily stop you on your way to amassing wealth.
Avoid impulsive buying as this can cause you to overshoot your budget. Ensure you pay off your credit card debts in time. By sticking to your budget, you are likely to be able to live within your means.
Financial responsibility is a sure way to create and accumulate wealth. However, you must know that this does not always come easy, even for the most responsible and intelligent people.
Many become weighed down by other demands and find it difficult to remain on track.
Grow your wealth
• Be financially responsible. Do this by taking care of your expenses and save some.
• Live within your means. This means you must make more money than you spend.
• Outgrow challenges that hold you back. For example, ensure you get paid for work done.
• Draw up a personal budget.
• Set clear goals. Don’t save more than you can make.
• Establish where to keep your money such as investing in property.
Photo: bestfinancenetwork.com
