Financial empowerment is not about how much money you have but how you handle your money. According to recent reports, 80% of Indian list Finance as their #1 stressor. Many of us are just one unexpected medical bill, expensive car repair, or some other money emergency away from financial disaster. But it does not have to be this way.
Financial empowerment is all about being in control of your finances instead of your finances controlling you.
Financial empowerment is about setting your financial goals, building and executing plans to maintain your chosen living lifestyle, and having a strategy to handle unexpected financial challenges and emergencies that pop up along the way. Whether at entry-level earnings or making six figures in your life, becoming financially empowered is about getting in the driver’s seat of your finances.
That way, you can make better long-term decisions and build the future you want without stressing over your next paycheck. Here are the top 8 stress-reducing financial empowerment tips to get you on the right track.
Change Your Outlook
One of the most important keys to financial empowerment is understanding your emotional relationship with your money and how this may drive your financial decisions. Our childhood strongly influences our personal finance decisions, and it affects our attitude regarding our finances in the present day. Most people often have complex emotions about money, resulting in decisions that may not be the best for them.
Remember, financial empowerment is not just about money but also about mindset. Proper planning, taking the time to strategize, and managing your savings and spending with your long-term goals can all contribute to a logical and calculating approach to money. For example, you want to start a business, but your fear and financial insecurity may lead you to assume that you will never afford to quit your current job and pursue your dream.
Financial empowerment can help you overcome this fear. You make a plan and say to yourself, “Today, I can’t afford to quit my job, but if I put a certain amount of money into savings each month and raise my credit score to qualify for a business loan, I can quit my job and start my business in certain time from now.”
Set Your Financial Goals
You must set a destination or a target before figuring out how to get there. This does not mean that you have to stick to this target and can not change your mind, but you can never reach your destination easily without knowing which direction you are going.
Determining your goals by what is important to you would be best. Some person wants to start a business, while others want to retire early and wish to travel. Many people find the SMART goal framework useful when setting their financial goals. SMART goals are the goals that meet the following criteria:
Besides setting big and long-term goals, you can set smaller and shorter-term goals that can guide you to your financial empowerment. There can be ongoing goals like increasing yearly income or specific goals like paying any existing loan by a deadline.
Make A Plan
Your goals are the destinations you want to reach along your financial journey, and you need a proper road map to get you where you want. The first step in this direction is budgeting. No matter how much money you make every month, financial empowerment only comes from how you handle that money. Understanding what you earn and spend every month can helps you make the right financial decisions to stay on track with your financial goals.
By setting goals, you can determine how much money you need to save or invest every month to reach your target and include that in your budget. Treating your savings or investment amount like a bill and depositing it in a different account is a good way to achieve financial empowerment. Using that money in any emergency can help keep you on track.
Make Your Money Work for You
While making your financial plan, you should include some money for investing or saving every month, and part of that money should work for you. Maintaining a balance of accessibility to savings for emergencies with a return on investment is crucial. Investing wisely and diversifying your money can build wealth with no extra effort! For example, investing in mutual funds, share market, or buying any property and giving it on rent is a very good way to diversify your investment portfolio.
Prepare for Financial Challenges
No matter how good your plan is, your journey can get side-tracked by an obstacle. An unexpected medical emergency or car repair can derail your plan. This situation can be stressful, but you never return from a road trip just because you got stuck in traffic for a while. That same theory applies here also; a financially empowered person knows that challenges will happen, and he is ready for them.
Planning is not just about your budget but also about your preparation for the unexpected.
You must plan and consider your options and know about the resources available when facing any emergency. By planning, you can make smarter choices while facing any emergency, which is financial empowerment’s advantage.
Learn Lessons from the Past Mistakes
Many people struggle with managing finances and maintaining their money before committing to learning and doing better in the future. You know it is never too late to fix your past mistakes and seek financial empowerment. If you have a poor credit history that reflects your past mistakes or you never had a strong credit history, remember you have the ability to fix this.
Financially empowered people manage their money properly, contributing to building or maintaining a good credit score. It is essential to borrow money at advantageous rates in difficult financial times.
Seek Financial Education
Much of our financial knowledge comes from our parents and family. Most schools do not teach personal finance, and those who usually teach only cover finance basics. Fortunately, in today’s world, there are many sources to get good and solid information about financial principles. Books like Rich Dad, Poor Dad by Robert Kiyosaki, financial podcasts, articles, blogs, or videos provide information easily, which can be very useful in financial empowerment.
Monitor Your Progress
You have a plan, goals, and a new mindset, but you cannot just stay in cruise control mode. You are monitoring your progress regularly and adjusting as required is critical for financial success. It is a very good idea to sit down and review your plan and budget every few months or every time your expense or income changes significantly. You must track whether you are sticking to your plan, budget, saving, and investing goals and then identify places to adjust your plan.
Become Financially Empowered
No matter what your income is or how much debt you are in, financial empowerment can improve your living standard, help you achieve your goals, and reduce stress.
By becoming financially empowered, you can have control of your finances instead of letting them control you.
Read: What is Better Investment: Real Estate or Stock Market