Should You Be Financially Conservative?

Should I be financially conservative? This is a question that every person needs to answer (and to be sure they don't confuse it with fiscally conservative, which deals with government spending and tax policies).

Realistically, it makes more sense for you to be financially conservative since it means that you are more cautious about the way you handle your finances and the way you invest your money. A financially conservative person will handle their budgeting the same in a good economy and in a bad economy. They may decrease the amount they spend when the economy is not doing as well. When you are financially conservative, you are careful with your money and you operate with a solid plan that you can follow. You work to minimize the risks.

What Does It Mean to Be Financially Conservative?

When it comes to personal finances, you are financially conservative when you plan what you want to do with your money. It means that you are cautious in your investments and that you do not overextend yourself. It does not mean that you do not invest. Nor does it mean that you don't do the things you love or dream about. Instead, you save up and plan to do those things.  

Basically, being financially conservative means that you are careful with your money. You carefully weigh your purchases and you avoid debt when you can. It means that you have a good plan and that you can execute it. 

What Are the Benefits of Being Financially Conservative?

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The biggest benefit of being financially conservative is that habits lead to building wealth. Someone who is financially conservative is prepared to handle financial emergencies. They have a plan for retirement. They have significant savings and investments and a well-organized plan to hit each of the major financial milestones. A lot of worry goes away when you are financially prepared to handle the unexpected.

Being financially conservative does not mean that you will not run into financial issues such as losing a job or an unexpected medical emergency. However, it does mean that you will have the tools to deal with those problems. This means you will have a solid emergency fund in place as well as the necessary insurance to cover those situations.

How Do I Become Financially Conservative?

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If you are tired of worrying about money constantly, or you feel like money is just disappearing and you have no idea where it went, you need to set up a solid plan that will allow you to steadily invest and save money. A financially conservative person is looking forward to the future and preparing for the unknown by building a reserve that they can access during an emergency.

Your financial plan will include long-term investing and savings goals, as well as a solid budget that you stick to every month. This makes it easier to manage your money. The steps sound simple, but it will take time and work to make it happen. Most financially conservative people have worked hard for years to get to where they are comfortable and can handle situations as they arise. Do not be discouraged if it takes you time to get to that point. 

Can I Get the Things I Want?

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Financially conservative people still buy the things they want. However, they are rarely impulse shoppers. They will take the time to carefully research the products they want. They will also save up and pay cash for most items, with the exception of a home and possibly vehicles. Impulse shopping is rarely an issue, and if it is then they put steps into place to limit how much is spent.

Most financially conservative people have a set of rules they follow regarding purchases and whether or not to buy a new or used car. When you are set financially, you will often have more available income to spend on the things you want. You do not necessarily have to do without, but you may make sacrifices now to be better off later.

Can I Be Too Financially Conservative?

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It is possible to become so focused on saving money and building wealth that it gets in the way of living your life. Your anxieties and fears about finances can get overtake the most important things in your life. To prevent this, set realistic, attainable goals and benchmarks so you can get to a point where you know you have achieved your objectives. Breaking your goals down into monthly and annual benchmarks will also help you to recognize when you have reached the points where you no longer need to worry and stress.

It is important to realize that properly handling your finances is meant to free you to enjoy your life. When your choices are limiting your ability to enjoy your life, even though you are debt free and have enough saved for the future, it is time to look at the decisions and budget you have in place. Your goal should be to save enough that it is affecting your budget, but not so much that you cannot do anything.

How Do I Find a Happy Medium for Myself?

Everyone has a different comfort level with risk. Generally, a financially conservative person is wary of risks. However, some risks—such as investing—should be part of your long-term financial plan. Embracing a frugal lifestyle is an important step in starting to win with money. You can find ways to cut back on your spending so that you have more money to invest. You can also look for more conservative investments that will still allow your money to grow faster than the rate of inflation.

Using a financial advisor should make investing easier to understand, and they should be able to explain the risks associated with each type of investment. Understanding the risks can help eliminate any fear you may have and allow you to invest to build wealth. If you feel like you could be more financially conservative than you currently are, setting up a budget and solid goals is a good place to start.