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Being financially empowered is a goal that we all aspire to. Unfortunately, for just too many it never happens the way we want it to go. In fact, just about everyone suffers some form of financial difficulty in life and truthfully some never recover from a setback. So knowing that you will face financial adversity at some point, what should you do to shorten that timeframe and make a full recovery that can last long into your future?
There are certain behaviors that can get you on the road to financial success. They don’t involve being dishonest, stealing, cheating, or lying either. The people who resort to that pay the price for it eventually and don’t sleep well.
What is Financial Empowerment?
Financial empowerment is simply control over your finances. When you control what happens to your money instead of simply letting things happen, you are on your way to success and financial independence.
And it may be even more important than you think. According to this article at Morningstar, financial empowerment was linked with emotional well-being. They found that people who feel empowered in their financial lives experience more joy, peace, satisfaction, and pride concerning their finances.
The Top 10 Steps to Financial Empowerment
Here are my top ways to get the financial power you seek in life. If you were to follow them, good things can happen to you and your money!
1. You really do need a budget
Creating a budget is actually easy to do, yet ignored by so many. The hard part is the tracking of what you spend and what you make so that it means something. And if you don’t do it religiously, it can just be a waste of time.
A budget is the support for your personal financial goals. It’s really important to make sure to account for both fixed and variable expenses on a monthly basis and set budget limits for “want” expenses (like dinners out and other forms of entertainment) so you can pay for all the “need” expenses (like rent, utilities, etc.).
2. Debt is a 4-letter word
We all run up some form of debt in life. Sometimes it’s unavoidable like when we buy a home. Sometimes it’s a cash flow issue meaning today I am short of money but when I get paid I’ll have enough to kill off my debt. But more often than not, debt is just plain indulgence and a bad decision.
Set a goal to pay off all debt as soon as possible. Make debt payments a line item to be paid every month as a part of your budget until it’s totally paid off.
3. Plan ahead for big expenses
Planning ahead involves expenses for both the short- and long-term. For expenses in the current calendar year, create a line item for these in your monthly budget (examples: holiday spending and vacations). Then have a line item for future known expenses like money for wedding plans or a new car fund and pay now in savings for your future needs.
4. Save, save, save
Build an emergency savings account. It’s not an option, it’s a must!
Build a reserve of three- to six-months of living expenses to guard against job loss or unexpected expenses. Automatically deduct savings from income and you won’t have to remember it and you won’t miss money you don’t get in your hand first!
5. Invest in your company-sponsored 401(k) and/or other retirement plans
Invest to a level that you at least receive the full company match. That is free money that you don’t want to leave on the table.
Also use a 529 savings plan and education funds, because a little put away today grows and grows for the time when you will need it…tomorrow.
6. Limit use of credit cards
Credit cards are sometimes a real necessity, but don’t abuse them and charge things that you can’t afford. Interest charges are killers and even worse if you use the higher-interest cash advances. Spend only what you have. Pay off credit cards by due dates each month and never “skip” payments.
7. Regularly manage and monitor all of your accounts and statements
Do you balance your debit/checking account and investment accounts? Every bill you get should be checked for accuracy because everyone makes errors including the companies that send you bills. If you don’t check, you may be just giving your money away!
8. Watch and monitor your credit score
If you want to be rated as “good” or “excellent”, you must pay your bills on time. You can monitor your credit for free every year in complete detail or you can get updated for free anytime with services like Credit Karma.
Making timely payments is one of the best ways to maintain good credit for future lending. Automatic payment systems like online banking can be very beneficial in doing just that.
9. Protect your money and identity
Set up identity theft protection on your financial accounts, regularly change online and mobile passwords, and safeguard your financial statements.
Ensure that you and your spouse openly communicate around your family’s financial position, including short- and long-term goals.
I am shocked about the number of households where no one ever discusses finances until there is a problem.
Teach your children to talk about finances and the power of saving and budgeting to put them on the right path to financial empowerment.
The scorecard shows that people who take their time and follow some simple rules about their money wind up winners, while those who are fast and loose with money and have no good records or a budget fail. I didn’t make that up, it’s true.
Spend a day going over your numbers, start the ball rolling, and stick to a real plan, and you will slowly but surely gain control and regain the power you want over your financials. That’s what you want and you can accomplish it if you have a plan and execute it every day.
Do you have a financial plan that works for you now? If not, why aren’t you setting down the simple rules you need to follow? Debt is a killer and you can free yourself from it now and forever. Will you?