How to Tell if Someone is Financially Irresponsible

Being financially irresponsible means someone will most likely live way above their means, unnecessarily borrow money from others, not have any savings or investments, and, despite all these, they will not care about their financial position.

Here are a few pointers to tell if someone is financially irresponsible:

They Have Not Invested Their Money

If you want to achieve financial success, your first step/goal is figuring out how to make your money work for you.

Although you can list the help of financial planners to come up with a plan, you can also consider buying a few shares of stock you feel confident about or starting to save for property investment.

Read Also: Must-Have Investments That Guarantee You Will Never Run Out of Income

They Live Above Their Means

Living above one's means means that they are spending way more than they can afford.

Furthermore, this spending is not only limited to frivolous purchases like excessive vacations, high-end phones, and designer clothing but also entails buying more houses or insurance than you can afford. Even though these are essential items, overextending yourself to buy them can cause incredible stress and financial difficulty.

Additionally, living beyond your means suggests that you may be more interested in impressing others than building wealth.

Read Also: 10 Warning Signs You are Living Beyond Your Means

They Have Unnecessary Debt

Plunging oneself into unnecessary debt without taking into account the end costs might make you slack on your financial goals, and that can make you financially irresponsible.

Rather than opting for a loan, wait until you have enough cash to afford whatever it is you want to buy, or simply put, if you can live without it, then you do not need it. But if you really have to take out a loan, ensure that the money is spent on something meaningful and of long-term value.

Read Also: Good Debt Vs Bad Debt: How to Tell the Difference

They Have No Insurance

Although insurance may seem like an extra cost, in the long run, when something does happen, you’ll be happy you have it to take some of the financial burdens off your shoulders.

Be it health insurance, life insurance, accident insurance, car insurance, etc. Having insurance is very important.

Read Also: Money and Me: Insurance, a True Life Saver

They Have Little to No Emergency Savings

Emergency savings or an emergency fund is meant to cushion you against the financial constraints when you stumble upon a financial emergency such as a hefty medical bill, or even worse, loss of income.

It is recommended to have at least three to six months’ worth of living expenses in your emergency fund.

If you have no emergency savings, it means every time you run into an emergency, your first stop would be to your normal savings account (if you have one), thereby derailing the financial goals that you have set for yourself.

Your second option would be to get into debt, thus incurring interest costs and if worse gets to worst, penalties upon defaulting.

Read Also: Six Simple Ways to Jump-start Your Emergency Fund 

They Use Their Emergency Fund for Non-Emergencies

If you have an emergency fund but you reach out to it even for recreational purchases, you are financially irresponsible

Unnecessarily drawing from your emergency fund suggests you aren’t sticking to your monthly budget (Consider using the 50/30/20 budgeting rule). And you’re likely prioritizing fun and convenience above financial security.

They Have No Budget

Going through life without a budget means you are not tracking how much money you are making, and how you are spending it.

Without a budget, you’re moving blindly, hoping your money will be enough to sort every bill, instead of working with a plan.

You risk running out of money way before your next paycheck comes in, falling back on your bills, defaulting on your debt repayments, etc.

Read Also: 6 ‍Simple Steps to Create a Working Budget‍

They Often Exceed their Budget

Having a budget will only do you good if you actually stick to it.

If you find it hard sticking to your budget, you might want to consider automating your finances. This means you turn your budget into a system that keeps you in check automatically.

Read Also: The Biggest Solution to Overspending: The 60/40 Budget

They Earn a Decent Income But Still Live Paycheck to Paycheck

If you earn a good income yet you almost always never have money to save or invest, chances are you’re financially irresponsible.

Perhaps you are living way above your means, are battling with emotional spending, or you are not sticking to your budget.

This keeps you in a cycle of running out of cash way before your next paycheck comes in, and even running into unnecessary debt.

Read Also: How to Budget and Save a Lot of Money As an Employee

Job Loss Would Throw Them into a Financial Storm

Only on rare occasions does one lose their job today, and land another one tomorrow. 

Your financial plan should be able to carry you through the period between losing your job and finding another, no matter how long this period is.

This might be an eye opener for you to open that emergency fund that you have been procrastinating for long, or to create multiple sources of income.

Read Also: 8 Ideas to Create Multiple Sources of Income

They Don’t Have Financial Goals

All good financial plans revolve around goals. These can range from short-term (i.e. going for a vacation this year) to long-term (i.e. retirement and buying a house).

The absence of specific financial goals leaves you with little to no reason to save and/or invest. You’ll almost certainly stop doing those things once something better needs your money.

Read Also: Money Mastery: How to Set & Actually Achieve Your Financial Goals

They are Way Off Target with Financial Goals

Financial procrastination means you keep pushing forward your savings towards your financial goals. If you are in your twenties, you might be tempted to think you are still far from retirement, so you fall back on your retirement savings.

If you were saving for your children’s education, and you still haven’t gotten them yet, you might be tempted to steal some months from that goal, thinking there is still plenty of time.

However, repeatedly doing this shows you are not sticking to your budget, it slowly becomes a habit, and before you know it, it is twenty years later with nothing to show for it.

Read Also: 6 Ways To Stay On Track With Your Savings Goals

Wrapping Up

No one wakes up and finds themselves financially irresponsible; it is a habit that is built, subconsciously, over time, depending on your money management skills.

Nevertheless, it is never too late to get yourself out of the turmoil, in case the above pointers resonate with you. Now that you are in the know, however hard it may seem, you can start undoing your mistakes and be on the way to financial success.