Part of having a secure financial future is being financially accountable – to yourself and to your family. Financial accountability is something to practice from your working years through retirement. There’s no mystery to financial accountability, and achieving these four key goals can put you on the path to being a financially accountable person.
Financial Accountability Begins With Building a Budget
The first part of being financially accountable is creating a budget. In order to do this, you need to understand your monthly finances – what is your income and what are your expenses? Prioritize your budget with the must-haves, like housing, food, transportation, etc., and then fill it out with the wants, like dinners out, vacations, shopping trips, etc. If you need to trim your budget, focus on the wants first, and the needs second.
Financial Accountability Requires Debt Elimination
Once you have your budget set, you need to make sure that it covers all debt payments. Ideally, you should have little debt outside of a mortgage and a car loan. For younger people, student loans are a fact of life, but should be a place where extra money is directed to pay them off faster. A household with a minimum amount of consumer debt (credit cards and personal loans) is a financially secure and accountable household.
Financial Accountability Protect Your Assets
Protecting your assets means that you have an insurance policy for your home, vehicles, and belongings. For instance, if you have a boat, you need boat insurance for spring, especially if you plan to take it out on the water soon. If you have expensive jewelry, make sure your homeowners insurance includes a jewelry rider. Depending on your income and net worth, adding an umbrella policy is a good idea. Umbrella insurance is extra liability insurance that protects you from major insurance claims and lawsuits.
Financial Accountability Requires a Plan for the Future
Make sure that you have drafted will that outlines how your finances are to be handled in the event you die unexpectedly. This will ensure that your family and loved ones have one less thing to deal with after your death, and that your wishes are carried out for the distribution of your assets. Proper estate planning with the right attorney can preserve much of your wealth for your heirs.
As you can see from these four points, financial accountability isn’t difficult to practice, but does require planning and thoughtfulness with how you live your financial life. Getting everything in order will make being financially accountable easier than you think.
Today’s Finance Friday Guest post is from Rachelle Wilber, a freelance writer from San Diego.
Reader Question: What do you think is the first step to achieving financial accountability? Is there anything you would add to our list?
According to the National Home Education Research Institute ...