Are You Fiscally Responsible? 13 proven habits to help get you there
What does fiscally responsible mean?
Government decision-making is a common use case for the term fiscal responsibility. Albeit, more so in theory than practice. A prudent goal of any government is to act with fiscal responsibility.
Balance taxation with spending. Enact monetary policies that add stability and certainty to the markets. It’s basic stuff. Don’t tax too much. Don’t spend too much. Don’t print shit tons of money and ignite inflationary pressures.
As citizens, we’re trusting our government to be fiscally responsible. To state it more simply, we’re trusting our government to be responsible. A major mechanic of a government is leaving taxes and spending for the public good. This intrinsic link helps us to understand the common use of this phrase. In reference to governments.
Fiscal responsibility also applies to us, the everyday people. We must be fiscally responsible in our lives. Our households are much simpler than the throes of government. Hopefully, there is much less corruption happening at home vs Washington
As households, we earn income, we spend and we use debt to finance our lives. We must be responsible for each input and the sum of the parts. Hold yourself to a higher standard than the government. You’re spending your money, not someone else’s. This is personal. Take it personally.
Comprehensive responsibility includes planning, execution, analysis of outcomes, and continual improvement. You can’t flick a light switch and be fiscally responsible. It’s something you grow into overtime with good financial habits. Surprise surprise, they should be simple financial habits too.
Plan, execute, analyze, and optimize each fundamental part of your finances. Income, spending, debt and investing. You will become fiscally responsible once you master the basics. Grow your income, spend less than you earn, and invest the difference.
Define fiscally responsible
At simple money habits, we like to define key personal finance terms but with a twist. A different perspective. Less stiff than the words in Mr. Webster’s book. Ok so, how do you define someone who is fiscally responsible?
“A person that can earn money, spend thoughtful, and invest wisely to create a balanced life.”
If you can do this, congratulations you’re fiscally responsible.
Fiscal responsibility as it relates to the government
Looping back to Uncle Sam to drive home a point. This website is all about you. The high achiever looking to create financial freedom in one’s life. After achieving freedom, you will be free to make this county a better place.
Should you agree with me on the importance of government fiscal responsibility. Perhaps you take your energy to Washington and clean up the mess.
Okay. Here’s my short rant about how the government needs to approach our finances.
#1 – Raise revenue via taxes. Simple taxes that consumers understand so they can make rational decisions. Price elasticity is a very real thing. You can avoid deadweight loss. It’s an economic outcome that hurts everyone. Fight your instincts and don’t be a moron when deciding what to tax.
#2 – Raise revenue via debt offerings. You have good credit uncle sam. Use it to your advantage. Issue debt at low-interest rates. Use the capital to invest in projects that generate high rates of returns. It works well, I promise.
#3 – Spend money to protect the people. Spend money to improve the welfare of the people. We all want a better life, and we understand the need to help the collective we. Spend our money on what matters not what will get you re-elected into office.
#4 – Manage the money supply like an adult, not a child. I’m sure it’s really fun to print money. Probably makes you feel like Scrooge McDuck. Please don’t 5x the money supply and then look like a dumbass who doesn’t understand why inflation is up.
To be very clear. We expect all our elected officials to be responsible with our money. If you stink at income and expenses, please top running for public office. If you execute against these four simple points. You can improve the welfare of the people.
#5 – Focus on these two key results. Ensure genuine full employment and address income inequality.
Full employment is obvious. If everyone who wants to work is working and earning an income that’s amazing. Work is an important part of the human experience.
Addressing income inequality is less obvious and way harder. It’s an incredibly difficult puzzle to solve. There are so many challenges weaved into our social fabric of America. A key root cause of inequality is geography and education. Where you grow up and what you learn are so critical to future success. We must work together to solve this puzzle.
In summary, I have this to say, to our government. Act like a high achiever on the road to FIRE. Fiscal responsibility will follow.
How to be fiscally responsible, follow these 13 simple money habits:
#1: Set Personal Finance Goals
You must set goals. How do you know if you’re being responsible or not? You need quantifiable goals to measure yourself against. Setting goals is a skill. It requires practice.
Enjoy the planning process. It creates value and brings clarify on its own. Once you set your eyes on the prize, do the math to quantify them. Once you have the objective and the measurable results. You begin creating your strategy. How are you going to do this? Luckily these 13 habits are a big part of helping you with the how. It’s a shortcode to financial freedom.
#2: Spend Thoughtfully and Seek Value
Don’t be like the government. Don’t spend with reckless abandon. Spend your money wisely. This is a critical part of fiscal responsibility. Be thoughtful with what you buy and when you buy it. When you spend, keep your goals in mind. Spend based on those goals and let them help you make decisions. Spend money on your passions.
Seek value when you trade your dollars for products and services. Seeking value doesn’t mean being cheap or frugal. Higher quality products at reasonable prices are of high value. Buying quality products that last a long time, reducing replacement costs and time. That’s a product of high value. Reasonably priced products that bring immense joy into your life, are of high value.
#3: Track Your Monthly Cash Flow
The day you think about your net savings as cash flow, is a transformational day. Your monthly cash flow is critical to your financial success. Just like in business.
Your cash flow is your post-tax income minus expenses. It’s how much cash is left over at the end of the month. Make it a habit to review your cash flow and the end of every month.
#4: Invest the difference and be an owner of assets
This is the foundation of your financial kingdom. Invest your cash flow, repeat until wealthy. To escape the burden of W2 work, you must do this. Investing your cash flow, the difference between income and expenses builds wealth. Invest your capital into wealth-building assets, like stocks, bonds, and real estate.
Automate this if possible. This ensures that you’re investing without fail or pause. Automation helps you invest without emotions. If the market is up, down, or sideways, you’re buying. Habitual buying of equities in a low-cost index fund will make you rich. The question is when not if. One day you will have enough money.
#5: Optimize your levers
You’re on the right track. You’re moving and grooving towards becoming fiscally responsible. After your monthly cash flow review, make a list of action items or next steps. What can you do to increase your income? What expense categories can you cut back on? What recurring expenses can you eliminate altogether? Make a list, check all the boxes, and evaluate the results.
#6: Be an advocate for your career and invest in yourself
No one cares about your career except for you. No one will champion for you better than you. Advocate for yourself in a positive way. Ask for upside, ask your employer to pay you based on the business value you create.
Invest in yourself. Invest in your mind daily. Always be reading. Stay current on thought leaders in your field or industry. Who is doing cool and interesting things? Read books. Read thoughtful and long articles with actual research. Be careful will all the click-bait drive garbage out there on the internet.
#7: Practice being grateful and daily mindfulness
The thought of saving hundreds of thousands of dollars is intimidating. The idea of growing a portfolio to millions of dollars can seem impossible. Thinking about these things can make you feel that you’re lacking. There were many times on my own journey that I felt poor. When your goals are audacious this will happen.
Take time every day, I prefer the morning, to reflect on all that you do have. The place you live, the job you have, the material possessions you treasure. The blessing of a sunrise in a land filled with opportunities.
Take time every day to enjoy quiet moments. Mornings, afternoons, and evenings if possible. A few short walks with only your thoughts and a breeze of fresh air will do. Whatever it takes, take the time to be with only yourself. It centers you, keeps you balanced, and fights off the never-ending stimulus of modern life.
#8: Program Your State of Mind For Greatness
Your mind is your greatest asset. you must take care of it and nourish it so it can serve you in all your endeavors. take time each day to put good things into your mind. listen to inspiring music. read to inspiring words. watch YouTube videos that motivate you and inspire you. Put good things into your mind, so you can put good things into this world.
Expose your mind to positive messages every day. Mornings to start the day right. Evenings to unwind and reflect on the course of your day.
Start each day with mindfulness, positive messaging, and physical activity. Cardio exercise done many times per week actually makes you smarter. Read Spark for more insight into this phenomenon.
#9: Raise Your Standards on a Regular Basis
Growth and progress are keys to happiness. Never settle for being settled. Throughout life, practice raising your standards on a regular basis.
Exercise often, and keep pushing yourself to stretch and grow. This doesn’t mean you must train like a professional athlete. It means training at the edge of your comfort zone, so your body gets stronger and more fit with each passing year.
Surround yourself with others that are high achievers. Raise your standards by raising the quality of people you spend time with. It’s human nature to model and compare yourself to others. It’s human nature to be competitive and level yourself up by comparison. Use this to your advantage and find healthy ways to push yourself and your friends to achieve your goals.
Don’t be afraid to ask for help. Don’t be afraid to find a coach that can push you even further. Coaches are not only for sports. They can help in many areas of life. Use their perspective to accelerate your growth and progress towards your goals.
#10: Nourish your mind by being a perpetual learner
Never stop learning. Never stop reading. Read real books not only trashy internet articles with tantalizing headlines. The quality of what you read matters a lot. Writing a book is a painstaking process. Find great writers who take the time to write great books. Make this the cornerstone of your lifelong pursuit of education.
Read great blogs and articles too. Don’t get me wrong, I derive great pleasure from the never-ending content stream that is the internet. But don’t forget to read great books.
Don’t underestimate the hidden gems of online education. There are great video courses out there on many subjects. Boot camps for coding and masterclasses for everything under the sun. The digital boom is here for learning outside the classroom. The world is your classroom when you have a phone and an internet connection. It’s amazing.
Then there’s YouTube. The “how-to” center of the world. I effin love YouTube videos when it comes to stuff around the house. It’s amazing how generous people are with their time. If you broke something, there is someone on YouTube with a video on how to fix it. What a world.
#11: Dream big, write it down and ask the universe for wisdom
This one is simple. It’s the hidden gem habit. It sounds the silliest to the nonbelievers. Dream big, I mean really go for it. Get all the dreams, ambitions, and ideas about a spectacular life out of your head. Write it down. Use a pen and paper. This helps organize your thoughts and embeds the ideas back into your subconscious.
Write your dreams down in your trusty notebook. Then, ask for help. Ask the universe, this crazy place we call home, for help. Everything has already been done. There is nothing new under the sun. The wisdom for what you’re looking for is out there. Someone has done it all before. Channel the wisdom of all those that came before you.
People crazy enough to do this will find extraordinary results. If you want to be average, skip this crucial step. Having doubts, research great people of history. None of them were average, and many had rituals about writing daily in journals. It’s not a coincidence.
#12: Celebrate the wins
You’re gearing your life towards greatness. The habits you’re building are the precursors to success. It’s not a matter of if, but when. What do you do when you find success? You celebrate! That’s kind of the point 🙂
Enjoy the win, celebrate the win, and have some fun! Many high achievers get so focused on the goal and the grind they’re dazed when they achieve their goals. Take time to enjoy the feelings of winning. The relief. The gratitude. The amazement. The holy shit is this happening feeling. It’s all pretty great. Be present in these moments and soak it all in. It doesn’t last very long. Grab it while you can.
Small milestones and big audacious goals need your acknowledgment. Be proud of your progress and find someone special to share it with.
#13: Invest > 90% of all your windfalls
This is the supercharger habit. This is how you speed things up, way up. You’ve positioned your life for massive success. If you’ve taken risks and become an equity owner in your work. The windfalls will start showing up soon enough.
These windfalls will look like “luck” for outside observers of your life. It takes a long time to become an overnight success. No one knows all the work you’ve been putting in. The constant focus on modeling your life to what you want. Take this “luck” and invest it.
Invest > 90% of your financial windfalls. Spend some of it. Enjoy in the present the fruits of your labor. Buy an experience or fun toy that you’ve always wanted. These small things commemorate the milestones of your financial journey.
Invest the rest. The windfalls will compound over time. Stack up a few of these windfalls early in your career and early retirement will be on the horizon in no time.
Remember you’re buying your freedom when you invest >90% of your windfalls. Let your friends on Instagram spend their come-ups on crazy trips and lots of stuff. What’s more important to you? Freedom or stuff?