What the Ideal Financially Responsible Person Looks Like

What does the ideal financially responsible person look like?  Is it you? We’ll discuss achieving financial perfection.  See how you stack up.

The ideal person will have no student loan, credit card, or car debt.  Their housing expenses will be no more than 30% of their income, total expenses no more than 50%. They will devote 20% of their salary to investing.  The other 30% is discretionary income.

Andrew wrote a detailed post about how you should be investing that 20%.  You get $25,000 in an investment account as your emergency fund first and then can branch out to riskier options.  Age is important too.  In our book, Mastering Mint there is a graph on page 92 showing what percentage of your income you need to save to retire in X number of years.

Credit cards can be a tool for the financially responsible.  As long as you pay the entire balance each month.  You can leverage credit cards for travel discounts, cash back, and purchase protection.

The ideal person has a budget.  No matter how few expenses you have, they are hard to keep track of unless you have a system in place.  Use Mint, use You Need A Budget, the envelope method, whatever works for you but you have to use a budget.

Financially responsible people spend money on experiences rather than things.  A great vacation, a nice dinner, a concert.  These are things worth spending money on and will make you happier than a closet full of new shoes or a giant TV.  Less stuff takes up less space in your home and in your head.  If you have too much stuff, find out how to get rid of it and make some extra money in Episode 96.

The ideal financial person starts young.  Your money is so much more powerful when it has thirty years to marinate in investments rather than ten years.  Putting a lot of work in the front end means less work when you’re older.

How did you do?  Don’t worry if you fell short.  This is the perfect person and you don’t see them much in the wild.  But practice makes perfect.  You know what to do so keep at it.

Show Notes

1792 Ridgemont Reserve:  Small batch Kentucky Bourbon.

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