The Financial Responsibility Spectrum
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The Financial Responsibility Spectrum
In this edition of the Personal Finance Project Newsletter:
My Perspective on Growth
The Responsibility Spectrum
Theory and Practicality
Perspective: Growing Financially Responsible
My interest in finance, specifically in personal financial responsibility, literacy, and management, has grown from my initial interactions with personal finances as a teenager. From the basic practices I instilled in myself (over time, of course), I have realized the relationship between planning and results, which was apparent through inward and outward observation. I considered my decisions regarding my work, spending, and non-financial desires. I compared myself to my siblings, friends, and broader social circle on these grounds, which brought awareness to how every individual has a unique integration of financial and non-financial aspects of life that shape their worldview.
Itās interesting to look back at the growing financial self. In our youth, we are introduced to money when we realize that our non-financial desires come with a cost. How we each receive money to obtain our desire varies and, seemingly, is tied to family finances. I have noticed that every family has a unique financial construct, and even though all family members (especially youth) may not be fully aware of specific aspects of the familyās finances, everyone generally understands the realities of receiving and sharing the slices of the āfamily financial pieā. The common ways dependents receive their share are to ask their parents, save money, or wait for their birthday or another gift-giving celebration. Sometimes, agreed-upon family policies are unique, like banking birthday presents, IOUs, and shared savings. This idea is by no means a factual study of family finances, however,Ā my observation is that as we grow into individuals, depending less on the family budget and more on our own income, our understanding of the relationship between money and our non-money desires is founded on the construct of the financial realities of our upbringing.
PFPās Financial Responsibility Spectrum
Considering our upbringing in our money-management understanding and practices, no wonder weāre all unique! From the beginning and as we gain financial independence, we each question: āWhat is the best use of my money?ā.
Financial responsibility, to me, revolves around this question. Financially irresponsible people likely donāt give this question enough attention and will fall into an unfavourable financial position. They may disregard their account balance, charging in-the-moment purchases to their credit card with little consideration about repayment with complete ignorance of high interest. Even a sliver of responsibility, slightly considering the question above, can put someone in a sustainable position by understanding that every financial decision involves a tradeoff - buying object A limits your ability to purchase object B.
This introduces a sort-of spectrum of financial responsibility - an idea I have been toying with recently. The spectrum takes a theoretical look at the progression from irresponsible to responsible and highlights the considerations and realizations of each stage.
Before we dive in, please note
My ideas are subject to change. This is an idea that I have been considering but have by no means finalized.
The model isnāt one-size-fits-all. Unique circumstances may embody different aspects of the spectrum progression.
The responsible end of the spectrum is not conclusive. It stops at more-or-less at the āaverageā wealth and responsibility. It fails to consider the finances of high-net-worth individuals.
Some fundamental things are missing from the spectrum, such as age (time factors), taxes, sufficient insuranceā¦ the list goes on.
With all that,Ā take this as an introductory exploration of financial responsibility.Ā Consider where you might be on the spectrum and what teachings must be absorbed to grow more financially responsible.
Without further adoā¦
What do you think? Leave a comment below or reply to this email to connect directly.
What Happened to Practicality?
Yes, I knowā¦ this Substack has barely anything resembling the practical aspect of personal finance that I constantly preach. Sorry, but sometimes a bit of boring theory can be helpful, especially if you can find ways to apply it to your financial situation. Ask yourself:
How financially responsible am I?
Are there any features of the spectrum that I have overlooked? Is the spectrum missing something?
Start by answering these questions, and come up with a plan. How can you reach āSavings Tradeoffsā while continuing to āLive Within Your Meansā? Or how can you apply your savings habits to long-term savings goals?
Furthermore, consider how you can ensure the successful implementation of your plan. The PFP Financial Tools are a good place to start. Maybe reading books like The Wealthy Barber Returns, The Psychology of Money, and The Great Canadian Wealth Builder will motivate you to instill responsible habits.
Day-to-day progression is easily overlooked, but give yourself six months, a year, or even three years, and you will witness significant growth. For my weightlifting and fitness-loving readers - you know the power of taking a longer-term perspective.
Thatās All, For Now!
An exciting Substack is coming your way on April 1st, and its no joke!
Stay tuned.
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