How to Become a Fiscally Responsible Adult in 7 Steps

Becoming a fiscally responsible adult is possible at any age and stage of life. Whether you’re in your 20s and worrying about paying off student loan debt or in your 40s and wondering how to ramp up your retirement savings, better money management can help you achieve your goals.

Becoming fiscally responsible is largely about changing your relationship with money — how you think about it, manage it, and spend it. It doesn’t have to mean living a life of constantly saying “no” or scrounging to save every dollar you earn. It’s about improving your understanding of your finances so you can leverage them optimally.

By doing so, you can attain greater financial stability, eliminate fear and stress related to money, and live your own Rich Life. That means a life that’s fulfilling to you and doesn’t leave you wanting for the things you truly cherish, whether that’s exotic vacations or designer brands. Read on to learn how you can become a fiscally responsible adult in just seven steps.

person paying at a cash register

What does it mean to be “fiscally responsible”?

Being fiscally responsible doesn’t just mean cutting spending and saving more. Rather, fiscal responsibility is about achieving a balance between income and expenses and leveraging your money in the savviest way possible. Fiscal responsibility is rooted in smart money management. This means knowing how much you earn, how much you spend, and how to plan accordingly.

Fiscal responsibility looks different for every person. A millionaire may splash their cash on luxuries that others might deem wasteful or extravagant, like flying in a private aircraft. However, these expenses aren’t fiscally irresponsible if the person is living within their means. This approach allows for guilt-free spending.

The benefits of being fiscally responsible

Taking the steps toward fiscal responsibility can be daunting at first. Long-term success is just as much about adapting your mindset about money as it is about changing the way you manage it. However, the many benefits of becoming fiscally responsible will make the effort worth it. Here are some of the rewards you’ll reap:

  • Improved money management: Fiscal responsibility starts with understanding your money, how it works, and how to use it wisely. If you’re the kind of person who’s prone to overspending or lives from one paycheck to the next, learning fiscal responsibility can free you from this cycle.
  • Greater financial freedom: As you learn fiscal responsibility, you’ll also learn how best to leverage the money you have. For example, instead of putting everything into low- or no-interest rate savings accounts, diverting money to stock market investments can be a beneficial way to keep your cash growing.
  • The ability to achieve life goals: Fiscal responsibility can make it easier to avoid wasteful spending and improve your ability to invest and save. This can help you achieve financial goals like buying a car, starting a business, or achieving FIRE (financial independence, retire early).
  • Access to life’s luxuries: Fiscal responsibility complements conscious spending, which follows the premise that you don’t have to deny yourself perks like manicures or dining out. By making smart money decisions and recognizing what adds value to your life, you can stop spending on stuff you don’t care about and leave money to make expensive purchases guilt-free.
  • Less stress about money: Money problems can be a huge source of stress. If you’re not financially stable, things like checking your bank account balance and paying bills can spark anxiety. Spending on fun things like a vacation also becomes less enjoyable when you’re stressed about the expense. By improving overall financial health, fiscal responsibility brings peace of mind.

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How to become a fiscally responsible adult in 7 steps

It’s never too late to take steps toward fiscal responsibility. However, it is important to take the first step. Getting started is more important than becoming a money management expert overnight. You’ll make mistakes on your path to becoming fiscally responsible, and that’s OK. I like to follow the 85% rule: Get 85% of the way there and move on with your life. Here’s how to start.

Assess your current financial situation

Fiscal responsibility means living within your means, whatever those might be. Start by creating an overview of your finances by tallying up the following: 

  • Your monthly income, including rental income, paychecks, etc. 
  • Your monthly expenses, including rent, utilities, food, education, health care, life insurance, health insurance, renters insurance, etc.
  • Your assets, including stocks, bonds, and other investments
  • Your debts, including student loans, mortgages, credit card debts, car payments, etc.

Rethink traditional personal finance advice

With your list of income and expenses in hand, it’s time to get organized — that means creating a budget. However, that doesn’t mean you’re about to forego all of your favorite life pleasures. The aim of your budget is to structure your spending in a way that fits your lifestyle. Budgeting shouldn’t mean punishing yourself.

To this end, consider the conscious spending model of money management. This strategy promotes positive spending habits and smart money management by creating space for guilt-free spending. It’s based on organizing your expenses into four buckets:

  • Fixed costs, which covers necessities like rent and bills
  • Investments, like putting money into retirement accounts (e.g., a Roth IRA or 401(k))
  • Savings for an emergency fund or for long-term goals like a big vacation
  • Guilt-free spending on those perks that make your life more enjoyable, from happy hour drinks to dinners out 

When it comes to your guilt-free spending, it’s important to consider your Money Dials. What nonessentials truly add value to your day-to-day life? Maybe it’s your fancy gym membership or perhaps it’s pricey scented candles. Understanding your Money Dials can help you prioritize how to spend your money, allowing you to cut back on expenses you don’t need and leaving more for things you love.

Monitor your spending

To implement the conscious spending approach, you need to establish guidelines for how to allocate your monthly funds. For example, you might spend 50% on fixed expenses, 30% on wants, and 20% on savings and investments. How you divvy up your spending will depend in part on the amount of money you earn and your expenses.

Then, put a system in place to monitor your spending. You might try using the cash envelope system, for example. There are also many useful apps that can help you keep track of where your money is going. Some link directly to your bank account, credit card, and debit card, recording all of your transactions.

Create an emergency fund

When creating your conscious spending plan, make sure to include an emergency fund. This can be used to cover everything from medical care to car repairs. When you save money, you’ll be able to manage these unexpected expenses without having to borrow cash or use credit. This can help you avoid taking on high-interest debts, which can be enormous liabilities (and can potentially damage your credit score).

Pay off debt

Debt can be both a drain on your finances and an emotional drain, leaving you stressed about unpaid IOUs. Tackling debts, especially high-interest debts, is another important step toward fiscal responsibility and financial freedom. There are a few different ways to pay off debt, including the debt avalanche method and the debt snowball method.

Grow your income

You can further enhance your fiscal responsibility through economic growth. Establishing multiple streams of income is one way to enhance your earnings and boost your net worth. There are many side hustles that can serve as a responsible means of making extra cash, from delivery services to selling goods on Etsy.

Passive income streams are ideal because they don’t require a great deal of time and attention, allowing you to grow your money without constantly hustling. Examples of forms of passive income could include real estate property rentals, real estate investment trusts, certificates of deposit, and peer-to-peer lending.

As with most aspects of money management, when it comes to growing income, success starts with the right mindset. Being able to look beyond the limits of your current earnings and identify new opportunities is critical. Earnable can help you get a better sense of what’s possible for you.


Investing can be another means of generating income and saving for retirement. When you first start investing, stick to the basics, like putting money toward a 401(k) and a Roth IRA. You can later expand from these baseline investment vehicles. Asset allocation, including a mix of short-term and long-term investments, helps divide up your investments in a way that makes sense and is sustainable.

Creating a bright financial future starts now

As you start on the path toward becoming a fiscally responsible person, you’ll have a lot of learning to do. There are many resources to help, from our “I Will Teach You to Be Rich” book to spending tips, retirement guides, and more. 

Continue to read up as your knowledge expands. The financial freedom and peace of mind that smart financial planning brings are great motivators. Your future self will love you for it.

Download the first chapter of I Will Teach You To Be Rich below and learn how to take control of your finances for good.

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Written by

Host of Netflix's "How to Get Rich", NYT Bestselling Author & host of the hit I Will Teach You To Be Rich Podcast. For over 20 years, Ramit has been sharing proven strategies to help people like you take control of their money and live a Rich Life.