How To Be Fiscally Responsible: 21 Steps To Build Wealth

Woman with calculator being fiscally responsible

What does being fiscally responsible mean?

If you struggle with getting control of your finances and achieving your saving goals, you may benefit from learning about those who are fiscally responsible.

When it comes to personal finances, “fiscally responsible” simply describes a person who has developed the behaviors and habits that allow them to manage their money well. ‘Fiscally’ is another way to say ‘financially’, so it holds the same meaning as financially responsible.

Those who are fiscally responsible have identified the actions they need to take to be in control of their finances, and developed the discipline to carry them out consistently. They are fully aware that their present actions with money affect their entire life.

Ultimately, being fiscally responsible leads to less debt, greater savings, and increased financial security.

And, when you apply these same habits to your own budget, you can also experience the same benefits.

The term means something a little different when applied to government or politics (which I’ll go over briefly later), but in this post I’m going to focus on personal finances.

I’ll go over 21 steps that fiscally responsible people take so you can start practicing these habits with your own personal finances.

But first, let’s talk about why developing this characteristic is so important.

Why being fiscally responsible is so important for your future

If you’re deep in debt and living paycheck to paycheck, you can feel like you have no control over your money. Instead, it’s controlling you. 

Learning how to be fiscally responsible is so important for taking control of your financial future. This means living within (or below) your means, not overspending, practicing effective budget management, and other good money habits.

When you are in control of how you use your money, you’re not stressed about how you’ll cover your bills. You’re prepared for emergencies that pop up. And you build security for your future and your family.

This all comes down to learning wise money management, and taking the right steps that lead to greater choices, freedom, and security.

Many people get stuck in a financial rut that eventually turns into a deep hole because they failed to plan for the future. They didn’t consider how their actions today could impact their lives decades from now.

My hope is that this post will guide you toward making better decisions with your money, and you’ll discover what you need to do to start building a better life.

Let’s dive in. 

21 smart ways to be fiscally responsible

Do you want to master your money and enjoy financial freedom? Do you want to have enough money for retirement and build generational wealth? These simple questions have a simple answer.

Of course you do. (Who doesn’t?)

But this type of success takes intentional action, consistency, and the right knowledge. You need to know what to do, then do it, then do it consistently over time.

This is being fiscally responsible. And, it’s the best way to control your financial destiny.

So, what do you need to do? I’m glad you asked.

Let’s go over 21 smart ways to be fiscally responsible, so you can start taking control, reaping the rewards, and experiencing financial peace for yourself.

1.  Have some short-term and long-term savings goals

First, you need to know where you’re going. Fiscally responsible goals will give you the direction and clarity you need as you take steps to build wealth.

Having both a monthly savings goal and an annual savings goal will keep you focused on the small, day-to-day steps you take while keeping your eyes on the future.

Short-term goals

Think about the goals you can reach within a few weeks to a few months. These serve as quick wins and give you the motivation to stay the course.

A few examples of short-term goals could be:

Long-term goals

Once you have a few short-term goals written down, think of some 5-year savings goals or beyond.

Defining a few meaningful long-term goals for your finances will give you a vision for your future, and a clear objective to continue working toward.

Some long-term 5-year goals could include:

2. Track your net worth

Knowing your net worth will help you stay in control of your financial progress.

Net worth is simply the sum of everything you own minus everything your owe. In other words, it’s the value of all of your assets after subtracting your liabilities.

Your net worth should continually change, as you increase your income and pay off debts. The important thing is that your net worth increases over time.

It’s possible you could have a negative net worth, especially if you have a large mortgage balance. This is normal if you are still in your 30s and 40s. However, once you get to your 50s and into your retirement years, you’ll want your net worth to be the highest possible positive number you can achieve. 

If you’d like to learn more about this important metric, read my post on how to calculate and track your net worth.

3. Follow a budget

Creating a realistic budget that you can stick to is one of the most important steps you can take to be fiscally responsible.

Think of it like an action plan with guardrails. Follow your plan and stay between the guardrails, and you’ll eventually reach your financial goals.

There are many different budget methods, including the zero-based budget and a variety of percentage-based budgets. Other examples of budgets are the cash envelope budget and the pay-yourself-first budget. It doesn’t matter what type of budget you choose, as long as it’s one you can stick to and helps you reach your objectives.

Once you start following a budget, you’ll be more conscious of how much you’re spending in each expense category. You’ll know where you can lower your living costs, and in what areas you’re overspending.

A person who is fiscally responsible knows that a successful budget isn’t static. It should be consistently reviewed and adjusted to reflect accurate budget amounts.

Budgeting is one of the first steps you should take to get control of your money! If you’re still not sold on following a budget, read my post on the benefits of budgeting.

4. Keep track of your spending

After you create a budget, you’ll need to keep a close eye on how you’re spending your money. This way, you’ll know that you’re staying within the limits you’ve set for each of your budget categories. You’ll also become more conscious of your spending habits.

If you’re just starting a budget, you might want to do this every day. Take all of your receipts and add up the totals. Then, compare that amount to the actual budget.

You can do this with pen and paper, an online spreadsheet, or a budget app. Personally, I use a website called They have a free version (which I use) and it’s literally like an online checkbook register. It helps me keep track of how much I’m spending in each category, and I can run reports at the end of every month. 

As you track your spending, you may want to adjust your budget. Maybe you find that you’d rather spend more on dining out and cut back on those coffee shop drinks. You’ll also realize certain monthly expenses that can be cut out altogether. Over time, you’ll determine more accurate amounts and make fewer adjustments.

5. Pay your bills on time

Making late payments will hurt your credit quickly. To be fiscally responsible, make sure you are paying your bills on time and meeting at least the minimum payment.

You can set up auto-pay through your bank’s website, or create a bill calendar that tells you when each bill is due.

The easiest way to not forget to pay a bill is to stick to a set schedule. Have a list of every bill you pay every month, and the due dates of each.

At the beginning of each month or week, set aside the time to pay bills that are coming due.

Always paying your bills on time will have a positive effect on your credit score, prevent late fees, and keep you in good financial standing.

6. Live below your means

There is a lot of advice out there to live within your means, but I believe a fiscally responsible person goes beyond that and intentionally lives below their means.

Living below your means refers to spending less than your income. This smart practice creates a financial cushion between how much you spend and how much you make. You can use this cushion to build resources for any future goals or unplanned expenses.

To live within your means, you budget for less than your total income. Perhaps you choose to live on 90% of your income instead of 100%. Then, you can put the 10% in savings to strengthen your financial security.

Learning to live on less than you earn takes a little discipline. Most people will spend more when they make more. This is called lifestyle inflation. If you want to be fiscally responsible, you’ll go against the grain and maintain your current lifestyle as your income increases.

Even some very rich people practice frugal habits! Look for areas where you can cut unnecessary spending, and be sure you know what your money values are. This will reduce impulsive spending and wasted income.

7. Make consumer debt payoff a priority 

If you have any consumer debt balances (credit card debt, payday loans, student loan debt), you should make it a priority to budget extra money toward paying them off.

I know this is so much easier said than done. Especially if those balances are in the thousands. You might feel overwhelmed by how much you owe that you choose to ignore it. Don’t do this!

Take a careful review of your budget, and find any leaks in your spending. Look for any costs that can be reduced, no matter how small the amount. Commit to cutting out unnecessary expenses so you can free up more income to pay off your debts.

It might take a few years and a lot of sacrifice, but getting out of debt is fiscally responsible. Make a committed effort to eliminate any high-interest debt first. The interest you pay is only limiting your potential for building financial security.

There are several strategies you can use to pay off your outstanding debt, but I highly recommend Dave Ramsey’s Debt Snowball method. This debt reduction plan focuses on small, quick wins by starting with your lowest debt balance first. This is so you can stay focused and motivated when paying down your higher balances. 

8. Review your credit report annually

High debt balances and late monthly payments will damage your credit. If you’ve found that your credit score has suffered due to some poor financial decisions, then you’ll need to take some steps to improve it.

A strong credit score (750+) can only help your financial position. You’ll benefit from lower interest on loans and more affordable rates, as well as be prepared for any future lending needs. Some employers even check your credit when you apply for a job!

Your credit report will reveal very important information, such as possible fraud issues or identity theft. You’ll also be able to confirm all credit reporting is correct and accurate.

The fiscally responsible thing to do is check your credit score annually, and take steps to improve it. The best news is, it’s absolutely free! Check and request your free credit report today.

9. Build a 6-month emergency fund

The recent pandemic taught us many things, including the fact that even a stable career could literally disappear overnight.

Having a sufficient emergency fund that can cover 3 to 6 months of essential expenses will keep you from going through a financial crisis during unplanned situations.

It doesn’t need to be a worldwide pandemic. If you’re living paycheck to paycheck, a crisis could result from a car breaking down or just getting laid off. Many people end up with a bankruptcy because they can’t pay mounting medical bills from a sudden accident or diagnosis.

A healthy emergency fund will eliminate relying on debt to get through tough financial times and unexpected expenses. You avoid compromising your goals and creating stress in your life.

Just like paying down high debt balances, building a 6-month emergency fund could take you many months or even a few years. Don’t let this deter you from starting! Even if you can only save $20 a week, you will eventually reach your goal.

10. Use sinking funds

If you want to be prepared for future expense that could take a huge bite out of your wallet, consider setting up a sinking fund.

A sinking fund is just an intentional strategy for saving specific amounts of money for some future expense you’re expecting. Unlike an emergency fund, you *know* what you want to spend this money on.

A few reasons for a sinking fund are:

  • A family vacation
  • A new car
  • Your kids’ wedding
  • Home improvement project
  • A medical procedure

All of these could be considered high-expense purchases, and few people have enough money in the bank to pay cash.

In order to avoid relying on debt, open a separate savings account for a specific expense. Make consistent deposits over a set period of time so you’re prepared to pay the cost in full.

11. Pay yourself first

My parents didn’t give me much guidance with money. In fact, the only thing they ever said was to “pay yourself first.” I didn’t take them seriously in my early 20s, but now I understand how fiscally responsible this habit is.

Paying yourself first simply means you set aside savings for your future before you pay for anything else. This could look like a pre-tax retirement fund contribution before your paycheck hits your account, or just transferring money to savings before you pay the bills.

When you pay yourself first, you’re prioritizing your future. You’re ensuring that your needs will be taken care of so you’re not relying on your kids or Social Security checks to support you. And, you’re limiting the ability for irresponsible action around your income.

You may have to let go of others’ expectations – like paying for your kids’ college or helping your adult kids with their bills. But, it really is for the benefit of everyone. 

If you struggle with prioritizing savings over bills, then set up some automatic transfers into a savings account. This will help you save for your future with very little effort on your part.

12. Have multiple streams of income

Being totally reliant on a decent-paying job with one paycheck can put you in a risky position. If that income source disappears, you’ll be overcome with financial obligations you won’t be able to meet.

Fiscally responsible people know they need multiple streams of extra income to strengthen financial security. If one source is eliminated, they have other streams to cover their expenses while they replace it.

Thankfully, there are many opportunities to increase your income in this day and age. You could literally create your own side hustle online within a day. Companies like Uber, Etsy,, and Fiverr are easy ways to market your skills and talents.

Leverage your knowledge and experience by offering services to your local community. There are many people who will pay for you to do something they either don’t have the time or talent to do themselves.

If you would rather create passive income, then consider investing in rental properties or a platform like Fundrise. You could also create a website to monetize, write an ebook to sell, or offer an online course. Some more traditional options index funds, dividend-paying stocks, or a high-yield savings account.

There are many avenues to explore when you want to create more income streams for yourself. Increasing your income can lower your financial risk and help you reach your goals faster.

13. Invest your money for faster growth

If you want to be fiscally responsible, then you should know how to invest your money wisely. Get over any fear you may have of not knowing how to invest. Take the initiative to learn from the many resources that are out there.

Start with your goals, such as building a retirement fund or saving for college tuition. These are key investments for creating financial security, so it’s important to find the appropriate vehicles to invest in.

For retirement, open a 401(k) or IRA account. For  a college fund, look into a 529 plan. If you want to build a 6-month emergency fund, look into a high-yield savings account or certificates of deposit (CDs). 

If you just want to test the waters, consider robo-investing options, such as Acorns, Wealthfront, or Betterment. These online resources can build and manage an investment portfolio for you at a low cost.

You should also consider your risk tolerance when deciding your investment strategy. If you want to take less risk, stick with CDs or government bonds. For higher risk, put some money in the stock market, mutual funds, IPOs (initial public offerings), or real estate.

The key to wise investing comes down to a few principles:

  • Be knowledgeable about what you’re putting your money into
  • Diversify your investment portfolio (see #14 below)
  • Invest consistently over time
  • Keep a long-term perspective

If you feel overwhelmed by all of the investment options out there, then reach out to a financial expert who can help steer you in the right direction. The sooner you start, the more you’ll benefit from compound interest to build wealth.

14. Diversify your portfolio

The fiscally responsible person knows they should never put all of their eggs in one basket. This is especially true when it comes to investing your money.

Diversifying your investments simply means you invest in a variety of investment vehicles and asset types so your exposure to one asset’s risk is lowered. By “spreading your money around”, you reduce the volatility your portfolio experiences over time.

Use this financial strategy to lower your risk of financial loss when the market takes a downturn. 

15. Have a retirement strategy

Retirement is a life season that you should be planning for your whole adult life. From your 20s to your 60s, having a financial strategy is critical to retiring on time.

Take advantage of your company’s 401(k) program or open an IRA account. Starting early can make a huge difference, as compound interest needs time to build your savings fund.

Those who are fiscally responsible don’t wait until they think they have extra money to invest. Instead, they create a budget and lifestyle in the present that allows them to save money for the future.

16. Get the right insurance

Another way to minimize financial risk and prepare for the future is having the right insurance coverage.

Insurance can sometimes feel like a waste of money, especially if you are an excellent driver or in great health. You might feel like it’s too much money to spend on something you may never use.

However, the lack of proper insurance can leave you in a vulnerable fiscal position against life’s unfortunate events. Without it, you could very quickly fall into a financial crisis.

Paying for insurance premiums is how you transfer risk to someone else – namely, the insurance company. This way, you protect yourself from the financial liability that an unexpected emergency can create.

With the right insurance, you also protect your family from possible financial burdens. A tragic accident could result in a loss of employment and income. An untimely death could leave your family without financial support.

Fiscal responsibility means planning for what might happen, even if you hope it doesn’t. This is where insurance makes the difference between financial security and financial disaster.

Here is a list of possible insurance policies you should consider:

  • Life insurance coverage
  • Auto insurance
  • Health insurance
  • Homeowner’s / Renter’s insurance
  • Disability insurance
  • Long-term care
  • Umbrella policy

Having good credit (see #8) can result in lower premiums, as well as a good driving record and being in good health. Make the effort to shop insurance providers for the best rates every time your policy renews. It’s a bit of a hassle, but you will likely benefit from significant savings.

17. Build generational wealth with an estate plan

Most people are just trying to support themselves through retirement, much less save money to pass on to their kids and grandkids.

But, being fiscally responsible will set you up to support your loved ones even after you’re gone.

Whether it’s family heirlooms, a living trust, or preparing for a death with life insurance assistance, you can be intentional about how to provide assets or additional funds for generations to come. Know what kind of legacy you want to leave behind, then create a plan to carry it out.

The best way to ensure your descendants receive what you’ve meant for them to have is with a will or estate plan. It’s important to meet with an estate planning professional to make certain all legal requirements have been met.

For more info on taking this critical step, you can read my post on how to set up an estate plan.

18. Learn some tax basics

I get it. Taxes are boring. And complicated. 

For these reasons, most of us tend to ignore them. At least until it’s time to file so we can get that nice tax refund every year.

However, having a good grasp of how taxes work can keep more money in your pocket.

Here are a few basics that will help you pay less in taxes:

  • Know what tax deductions and credits you qualify for
  • Be aware of how much income tax is taken out of your check, and why
  • Invest in tax-favored accounts (401k, IRA, HSA, etc)
  • Know the difference between federal, state, and local taxes
  • Make charitable contributions to non-profit organizations
  • Learn how to file your own taxes

There’s no reason to pay more taxes than you need to! Each of these steps can potentially protect more of your income from taxes. If you want to educate yourself on tax basics, the best resource to learn is the Internal Revenue website.  

19. Read the fine print

Ignorance is bliss, right?

Well, until it costs you money.

Don’t be ignorant. Read the fine print on every document related to your bank accounts, investments, and insurance policies. Be familiar with the fee schedule of each one, what the interest rates are, and any other pertinent information you need to know to make sound financial decisions.

If the jargon is over your head, ask questions. Don’t ignore the complicated phrases and think nothing will go wrong.

Take the time to know the details. Your money is worth it.

20. Continue to review your financial position

Personal finances are an ever-evolving matter in life. There is no “setting and forgetting”. To be fiscally responsible, you need to periodically check in to see what adjustments need to be made.

This could happen monthly with a budget, or annually with investment allocations. Different life seasons and events will create more reasons to look closely at your financial situation and come up with a new strategy.

Wise money management is an ongoing habit if you want to be responsible with your finances. Don’t let complacency keep you from meeting your financial goals. Make the time to review your finances on a consistent basis, so you’re fully prepared for your future.

21. Keep increasing your financial knowledge

What is the number one thing you need to build wealth?

According to Robert Kiyosaki, author of Rich Dad, Poor Dad, it’s financial education.

Don’t blame your parents or teachers for never teaching you how to manage your money. Take the initiative to find resources that will help you increase your financial literacy.

There’s no excuse to not learn more about personal finance. From podcasts to books to videos on YouTube, there is a wide range of free tutorials to help you.

Here are just a few topics to learn more about:

  • Budgeting
  • Investing
  • Creating income
  • Saving money
  • Retirement funds
  • Estate planning

Take the initiative to learn more about how to optimize your income, get out of debt, and save for your future. There’s no better way to learn how to be fiscally responsible.

For some inspiration, check out these 21 free online personal finance courses.

What is fiscal responsibility in government?

Government institutions also have a fiscal responsibility to the citizens of a nation for creating economic security. The overarching task is to balance government spending with taxes collected. When actual spending equals tax dollars, we have a balanced national budget.

However, the reality is that the U.S. federal debt continues to increase. This results in higher interest rates, greater national security risk, stunted economic growth, and a higher probability of a fiscal crisis.

As an American citizen, you can choose to do your part to hold our government accountable. Contact your local representatives and voice your concerns and opinions.

What is fiscal responsibility in politics?

The phrase “fiscal responsibility” can also be applied to the context of politics, and typically refers to fundraising, allocating funds, and spending money appropriately. This all comes down to following a proper budget.

State taxes provide funding for many different expenses, such as roads, schools and after-school programs, and health care. Our state and local politicians are responsible for ensuring these public funds are never used for personal reasons.

In conclusion

Do you want to build wealth and increase your future financial security? Then I encourage you to apply the financial habits and strategies of those who are fiscally responsible to your own finances. 

Educate yourself, create a plan, and be intentional with how you manage your money. No matter where you’re at in life, it’s never too late to improve challenging fiscal situations. You can learn how to take control of your money, increase your wealth, and create a strong financial legacy.

There are many steps to becoming fiscally responsible. But, with every step you take in the right direction, you’re preparing for a secure future for you and your loved one.

Someday, you’ll thank yourself when all your efforts pay off.

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I hope you’ve enjoyed reading

How To Be Fiscally Responsible: 21 Steps To Build Wealth

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