In this MoneyTalk, we will talk about Becoming Financially Empowered.
Financial empowerment is the process of taking control of your finances and then making informed and responsible decisions about your money. It includes learning how to manage your finances, understanding your responsibilities when it comes to money, and feeling confident in your ability to make financial decisions. In simple terms, Financial Empowerment means that you are in control of your finances. Money and finances are some of the top stress-inducing topic in life. But, financial empowerment will help you develop a positive relationship with money, will reduce the stress associated with money, and will help you lead a better life.
Having this kind of power over your finances can profoundly impact your life. When you are financially empowered, you can make choices that allow you to live the life you want to live, free from financial stress and anxiety. You can also feel confident in your ability to weather any financial storms that come your way.
Now, why is becoming Financially Empowered important?
Financial empowerment is important because it can help you achieve your financial goals and improve your overall well-being. When you control your finances, you are less likely to experience financial stress. This can lead to improved physical and mental health and increased productivity at work. In addition, financial empowerment can help you build wealth and attain financial security.
Let’s go over a few key things you can do in the process of becoming financially empowered.
1. Become Financially Literate
One of the first things in the journey toward Financial Empowerment is becoming financially literate. You should learn about financial planning, investing, and various money-related topics to take control of your finances. There are thousands of books, websites, videos, podcasts, and financial literacy courses. Resources, such as this MoneyTalk, are also available to help get started with financial education. Investing in educating yourself about money is one of the best things you can do for your financial future. This includes investing in your financial education and taking courses to improve your money management skills. You should also stay informed about finances by reading financial news and articles, listening to podcasts, watching videos and attending seminars and webinars related to personal finances and money management.
2. Know Your Current Financial Situation
The first step is that you become aware of your current financial situation. This means understanding your income, expenses, debts, and assets. You can’t make informed decisions about your finances if you don’t know where you stand today. Being aware of your financial situation is the first step to taking control of your finances. You can use a financial evaluation tool such as MoneyPatrol to get started with this step. MoneyPatrol will make it very easy for you to understand your current financial situation by linking your financial accounts and getting your transactions in one place.
3. Set Financial Goals
Once you understand your current standing, you can use this information to set financial goals and create a plan to reach them. Setting financial goals gives you something to work towards and helps you stay motivated. When setting goals, make sure they are SMART goals: specific, measurable, achievable, relevant, and time-bound. Make sure your goals are realistic and attainable. To set goals, analyze what you want to achieve financially. Do you want to buy a house, start a business, save for retirement, or pay off debt? Use these questions to come up with your financial goals. For example, your goals could be about saving money for a particular thing such as buying a car or saving money for a down payment towards a house purchase.
4. Develop a Positive Relationship With Money
Once you know your current financial situation and have set up financial goals, focus on developing a better relationship with money. Many people have a complicated relationship with money. But if you want to be financially empowered, you need to develop a healthy and positive relationship with money. You can start by changing the way you think and talk about money. Think about money as an agent of change in your life. Money is not just meant for spending, but every purchase you make needs to be a conscious decision to spend such as evaluating whether your purchase is a need or a want. And more importantly, you need to consider how this expense will impact your timeline of achieving your financial goals.
5. Track Your Credit Score
Your credit score is one of the most critical financial tools you have at your disposal. A good credit score can help you qualify for loans and lines of credit with better interest rates, while a bad credit score can make it difficult or even impossible to borrow money. The best way to improve your credit score is to make all your debt payments on time and keep your balances low. When you have a good credit score, you will have more financial options and opportunities. Checking and tracking your credit score on a monthly basis and working proactively to improve your score should be a priority for you.
6. Build Up Your Savings
One of the most important things one can do for their financial future is to start saving money early and saving often. This means setting aside money regularly into a savings account, preferably one with a reasonable interest rate. One should also make an effort to reduce expenses so that as much money as possible can be saved each month. Your savings will give you a cushion to cover unexpected expenses and will help you reach your financial goals faster. Over time these savings will add up and will give you confidence that you will be able to survive life setbacks such as a job loss.
7. Invest Your Money Wisely
Once you get into the habit of saving money, your next step should be investing your savings wisely. This means putting your money into assets that will appreciate over time. Examples would be investing in real estate or in stocks and bonds. The stock market, especially index funds, has consistently given good returns every year for the last many years. If you continue to invest a specific amount every month into the stock market consistently over a period of a few years, due to the magic of compounding, your stock investments will have grown exponentially, setting you up for a secure financial future.
8. Plan for Retirement
If you want to retire comfortably, you need to start planning and saving for retirement as early as possible. The earlier you start, the more time your money has to grow. Several retirement savings vehicles are available, such as 401(k)s, IRAs, and annuities. It will help if you talk to a financial advisor to determine which investment option is best for you. Additionally, max out your contributions to 401K plans, and by the time you are ready to retire, you would have a pretty strong retirement fund available in these 401K plans.
9. Talk About Money With Your Partner
To define money and empower yourself financially, you need to talk about it openly and honestly with your spouse or partner. When you do this, you will learn from each other, build trust, support each other, and hold each other accountable. If you do not have a partner, find someone you trust or hire a money coach to discuss money. You might be surprised at how helpful and enlightening these money conversations can be, and these conversations will shed new light and change your perspective on how you think about and treat money.
10. Seek Out Financial Role Models
It can be difficult to feel empowered when you don’t know any financially successful people. Therefore, it’s important to seek out financial role models – people who have achieved the financial life you want. You can find these people in real life or online, and they can provide valuable insights, motivation, and inspiration. You can even start following such financially successful people on social media, read about them, understand their strategies, and motivate yourself to follow in their footsteps.
Let’s Summarize What We Have talked Today
Understanding Financial Empowerment and working towards it, is a journey that everyone should take. People who are financially empowered lead a relatively stress-free life. Becoming financially empowered should be a key goal in life and this goal can be achieved through financial education, financial planning, and money management. Focusing on improving savings, decreasing expenses, getting out of debt, and putting money in investment vehicles, are critical aspects of this process. Additionally, having role models who have achieved financial success, evaluating your relationship with money, talking about money with your partners, and staying informed about finances, are some of the things you can do to achieve financial empowerment.