Becoming Fiscally Responsible: 9 Steps to Take Today

This post is for educational and informational purposes only. We expressly recommend that you seek advice from a financial or tax professional. Please see our full disclaimer for further information. This post may contain affiliate links, which means we may receive a commission, at no extra cost to you, if you make a purchase or signup for a service through a link. Please see our full disclosure for further information.

Sharing is caring!

Get our FREE Guide:  21 Days to a Better Financial Life!

When you hear the phrase fiscal responsibility, your first instinct is probably to think about government spending and massive deficits. However, fiscal responsibility doesn’t just apply to governments. It applies to your finances, too. Today, I’m sharing how to become fiscally responsible with nine easy steps to improve your financial picture.  

What Does it Mean to be Fiscally Responsible?

Before we get into specific strategies, let’s talk about what it means to be a fiscally responsible person.

In a nutshell, fiscal responsibility means being accountable for finances – be it for governments, companies, or yourself!

And when it comes to personal finance, fiscal responsibility is vital! It’s so easy to make excuses about your finances. You don’t make enough. Surprise expenses keep cropping up. You just can’t save enough right now.

That’s where fiscal responsibility comes into play. Rather than making excuses for your finances, you learn to take responsibility for them. Being fiscally responsible means being accountable to yourself.

Fiscally Responsible Pinterest Pin

Why is it Important to be Fiscally Responsible?

Wondering why it’s important to be fiscally responsible? The answer comes down to control. Rather than feeling like external factors beyond your reach influence your finances, you’ll gain the ability to control your finances.

When you feel that you have control over your finances, you’re more likely to reach your financial goals. 

Financial goals, and in turn, money, are a means to an end. Money is about security, experiences with friends and family, and time freedom. 

When you create a life of fiscal responsibility, you’re well-positioned to meet the money goals that are most important to you.  

How do you Become Fiscally Responsible?

Okay, enough about what it means to be fiscally responsible. Let’s get down to how you become fiscally responsible.

While no two people will have the same path to fiscal responsibility, you can take some general steps to get there. 

I will lay out a set of steps to take to become fiscally responsible. Follow these steps in order, and you’ll be well-positioned for a better financial future. 

1. Set Goals

If you’ve ever read The 7 Habits of Highly Effective People, you may remember one of the habits of successful people is that they begin with the end in mind.

Said differently, successful people set goals, so they know where they want to go, and then they develop a plan to get there. Because without a plan, you’re far less likely to be successful with money. 

Everyone has different financial goals, so make a list of the ones that are most important to you.

Some common goals include:

  • Retiring by age [x]
  • Saving for a down payment within [x] years
  • Paying down high-interest-rate debt
  • Saving for a child’s college education
  • Paying off your mortgage

There are countless goals from which to choose, so start by making a list of those which are most important to you. When you set goals, you’ll have a much clearer path of exactly what you need to do to succeed with your money. 

2. Understand Your Budget

Okay, most people hate the idea of budgeting. Maybe it’s because it sounds like you’re making sacrifices, or you simply can’t bear to see the reality of your finances. 

When I started budgeting, however, I felt liberated. Rather than feeling like I was giving something up, instead, I felt that I gained control over my finances. I gained freedom in knowing where my money was going.

Remember, being fiscally responsible is about being accountable to yourself for your finances. To do that, you have to know where you are spending money, and the only way to do that is through budgeting. 

I budget with an app called YNAB because I find its zero-based budgeting features and integration with concepts like sinking funds to be very effective. Since using it, I’ve saved thousands of dollars. However, depending on your budgeting style, there are other good options to consider, like Tiller Money and PocketSmith.

No matter how you budget, the key is to find a system that sticks. Your future self will thank you.  

3. Assess Your Net Worth

The next step in becoming fiscally responsible is to assess your net worth. Your net worth is your personal balance sheet. It helps you understand your assets versus your liabilities. 

Your assets include things that you own (like your residence, investments, cash, etc.), and your liabilities are things that you owe (your mortgage, student loans, etc.). 

While a budget helps you make the day-to-day decisions, your net worth measures your cumulative progress – your assets minus liabilities.

Again, being fiscally responsible is about being honest with yourself about your financial position, and net worth tracking is just one tool to help you do that.

My favorite net worth tracker is Personal Capital, but I’ve also compared some of the best net worth trackers if you want to explore other options.

Personal Capital

Personal Capital is a comprehensive suite of financial tools that helps you track your net worth, make sure you stay on track for retirement, and much more! The best part about Personal Capital is it offers a FREE way to track your investment and cash accounts and plan your financial future! Check out this review to learn more!

4. Build an Emergency Fund

Once you’ve got a handle on your goals, budget, and net worth, it’s time to start taking massive action towards financial progress.

The very first step is to build up a sizable emergency fund. While you’ll eventually want to play financial offense, the emergency fund is about starting with good defense. It can protect you from a financial emergency, which is massive progress towards shoring up your finances.

There’s no perfect answer to how big an emergency fund you need. Based on my financial situation, I aim to keep six months of expenses in liquid financial instruments, but that may not be the right number for you.

The two places where I hold my emergency fund are a high-yield savings account and Series I savings bonds. Using these accounts ensures that my money is readily available if needed in an emergency.

While it can take time to build up this financial moat, it will protect you from surprises down the road and help you be better prepared for an emergency. 

5. Pay Down Debt

Next, if you have high-interest-rate credit card debt, you must address it as soon as possible. I hate to be the bearer of bad news, but fiscally responsible people do not carry consumer debt. 

Why? Because they live within their means and avoid overspending.

So, if you have bad debt – debt with an interest rate of ~7%+ – aim to pay it off as soon as possible. Simply put, it’s not possible to get ahead if you have high-interest-rate debt. 

And while you’re paying down your debt, you’ll also have the opportunity to improve your credit score. For example, reducing the amount of debt you have relative to your available credit will improve your score. Building your credit score is just one more step towards fiscal responsibility.

Notably, I don’t recommend going completely debt-free. If you have a mortgage you can afford on a fixed-rate, low-interest-rate loan, keep it! Rather than paying it off (or other similar, inexpensive debt), you’ll do better by investing for the long run.  

6. Invest to Build Wealth

Once you’ve got your consumer debt under control and a sizable emergency fund, it’s time to start playing offense by investing!

There are countless ways you can invest, but let’s start with the basics. For most people, it makes sense to begin with tax-advantaged accounts like the 401(k) and IRA. These accounts make it easier to keep more of your investment dollars in your pockets rather than Uncle Sam’s.

My go-to investments are primarily low-cost index funds comprised of stocks and bonds. The proper allocation between asset classes varies based on your goals, risk tolerance, and investment time horizon. 

If you feel you need a bit of guidance here, try using a robo-advisor like M1 Finance that can help you build a portfolio that meets your investment goals. Or, if you want to give it a go on your own, check out this ASF guide on How to Start Investing.

Once you have the basics of your portfolio worked out, you may want to consider alternative asset classes like real estate. 

I invest in real estate in multiple ways. First, I own publicly traded REITs (real estate investment trusts). Second, I have started buying rental properties. I just went under contract on my 3rd rental unit and am very excited about it! Finally, I invest in real estate passively through a platform called Fundrise. Fundrise is one of my favorite discoveries and perhaps the easiest way to dip your toes into real estate investing.


Fundrise is my favorite tool for getting started with real estate investing. It allows you to invest in a diversified portfolio of commercial real estate at low costs and with a great deal of transparency. Check out my full review to see if this tool is right for you!

7. Get Proper Insurance

Next, we have to talk about some less fun topics on the journey to becoming fiscally responsible.

One of those topics is insurance. If you want to be financially responsible, you have to protect yourself from catastrophe. Let’s talk about some of the kinds of insurance you should carry.

First, you must carry medical insurance. It does not matter how healthy you are. One bad accident or diagnosis could put you in financial ruin. Health insurance is expensive. I get it. But not carrying health insurance could cost a whole lot more.

If you drive a car, you need to have auto insurance. According to the Insurance Information Institute, approximately one in eight drivers is uninsured. And frankly, that’s terrifying. If you have a car accident, not only will you have repair bills, but you have massive liability exposure if someone decides to sue. We live in a litigious society, and if you don’t have adequate liability protection, you run the risk of losing everything each time you set out on the road.   

Next, depending on whether you own or rent your home, you should carry homeowner’s or renter’s insurance. This insurance is typically not that expensive, and it can protect you from environmental damage (like hail), property theft, etc. Your home is probably your most valuable asset – you need to protect it.

The next type of insurance to at least consider is disability insurance. Disability insurance protects you if, for some reason, you are unable to work. As crazy as it sounds, a significant number of people (some estimates indicate as high as 1 in 4) will experience some type of disability in their lifetime. When this happens, disability insurance can provide income security while you’re unable to work.

Finally, if there is anyone who relies on you financially, consider getting life insurance. If you’re single and no one else depends on you, you probably don’t need life insurance. But if you’re married, have kids, etc., consider life insurance to protect your loved ones if something happens to you. 

Insurance stinks. Are insurance companies selling fear? Absolutely. But when you need insurance, it’s far better to have it than not. I spend a fortune on insurance each year, but at least I know I’m covered if something were to happen. It’s not the place to skimp.

8. Create an Estate Plan

No one likes to think about their mortality. I don’t either. But the truth is, being fiscally responsible means being prepared for all sorts of different circumstances.

As you build wealth, your finances become more complicated. Therefore, one of the best things you can do is create an estate plan to make things easier on those you love if something were to happen.

An estate plan often includes documents like a will, durable power of attorney, etc.

I am by no means an expert in this area, so I would encourage you to find an estate planning attorney to help you get organized. 

9. Further Optimize Your Systems

If you’ve taken action on all of the steps outlined thus far, you’re well on your way to becoming fiscally responsible.

Once you do that, all that’s left is to optimize your systems further to build more wealth. Some ideas on how to do that include:

While there are countless other ways to refine your financial systems further, these are just some ideas to get you started. 

Becoming Fiscally Responsible:  9 Steps to Take Today

If you want to become fiscally responsible, you need to take ownership of your finances and hold yourself accountable. The steps to get there aren’t hard – you just have to take action. 

Let’s recap the nine steps towards becoming fiscally responsible. 

  1. Set Goals
  2. Understand Your Budget
  3. Assess Your Net Worth
  4. Build an Emergency Fund
  5. Pay Down Debt
  6. Invest to Build Wealth
  7. Get Proper Insurance
  8. Create an Estate Plan
  9. Further Optimize Your Systems

Take action today! Get started with a budgeting app like YNAB, track your net worth with Personal Capital, or start investing with a service like M1 Finance or Fundrise!

You may also like…

Inline Feedbacks
View all comments