Situations in life can be very overwhelming and demanding. People tend to be at the crossroads of decision making when they are in a financial crunch. The reasons could be many, some of which include: a lack of formal education, financial illiteracy, etc.
It gets awkward to a point where people suffer from a complex and get withdrawn into a shell as a result of financial stress. They become socially withdrawn, and they just would not know whom to confide to about the financial distress that they are facing. In such a case, the increase in stress and uncertainty can lead to many health problems, be it mental or physical.
Financial crunch affects the rich and the poor alike. Successful people are a breed apart from the rest of the crowd due to their immense self-belief and value system, belief in education, healthy outlook towards life and people and most importantly their ability to manage and make more money.
As much as we may hear that ‘money is not everything’ it can severely impact most of your life decisions and the lack of knowledge on how to manage money can also determine the trajectory of your life.
What is Financial Empowerment?
Financial empowerment is a process and a personal trust to remain responsible and uplift oneself, to self-educate and be aware of the choices that one can make. It is important to make those choices only then a positive transformation can be possible towards action and desired results.
In other words, financial empowerment is to take a keen interest in seeking out knowledge and use this newly attained knowledge in such a manner that it not only promotes financial gain but also continues to benefit the person even in the future.
People who are aware of how money works are considered to be financially savvy. They are aware of savings and investments, interest rates, investment avenues, stocks, mutual funds, etc.
Such people take the effort to remain aware of the trends in finance and economy. They have a confident approach and explore solutions for a better gain to achieve financial traction. Their self-belief is such that they are conscious of their personal value system that propels them to make prudent decisions.
What Are The Advantages of Financial Empowerment?
When a person is informed and skilled, he/she knows where to seek help in case of financial challenges. Empowered people can access and exercise the best option for financial products and services that can meet their needs. This sense of empowerment can build confidence to effectively use financial skills, knowledge, and resources to reach their goals and objectives.
In fact, once this skill has been developed, it can be used to educate and empower others with the aim to build their future with financial skills and planning. It is a pleasure to guide and watch people grow their skills and knowledge in financial expertise.
Trust is the key, and people will follow suit when they see visible results of progress in the lives of their friends and colleagues.
Tools For Financial Empowerment
1. Setting Financial Goals
Goals are short term and long term- and, it begins with cultivating a growth mindset.
- To brainstorm over hopes wants, and dreams
- To measure and track progress
- To appreciate the small incremental improvements
2. Savings Plan
- To set aside funds for unexpected expenses and emergencies, e.g., car trouble, new appliances, medical expenses, etc.,
- To set aside funds for insurance premiums, school fees, holidays, etc., quantified to 4x times/ per year
- To plan for living expenses in case of job loss or a pay cut.
3. Bills and Sundry Expenses
- It is responsible and practical to think about ways one can cut down on expenses as a best practice.
- Maintaining a spending tracker to watch where the expenses are going is a crucial step in financial empowerment.
4. Manage the Cash Flow
- Time is the essence of dealing with those sensitive money matters. Identify the dates when cash inflow is sluggish.
- Devise a checklist to improve the cash flow.
5. Dealing With Debt
- Be aware of the implications of falling into debt beforehand. Servicing debt is not easy, and it takes months or years to close a debt. This obligation can be a setback in financial planning options for the future.
- Incase debt has been accumulated, make sure to pay it back responsibly and take the help of professional that can guide you through the process. It is necessary that one is aware of how to manage the debt, and a professional can help in creating a financial plan to pay the money back over time.
6. Understanding Credit Vs Debit
- Having access to credit is great, and a powerful feeling, however, using credit without thinking can cause a debt trap. So, it is always a good habit to clear off card dues and maintain a zero balance.
- A good understanding of debt and financial planning can help achieve a greater degree of control over the future.
7. Understanding Credit Reports and Scores
- As mentioned earlier, it is a personal responsibility that one must form as a discipline, and the ability check my credit rating has been made so much easier with the help of various financial portals.
- Understanding a credit report is important because financial institutions, realtors, insurance agencies, landlords, and employers depend on it to make their own assessments.
- Every individual must monitor and check into his/her credit report, periodically at least once or twice a year.
- The importance of a credit report is such that it has become the very basis for reference checks and validation by employers, banks, landlords, etc.
- Monitoring credit score and creditworthiness does impact many aspects of routine living, e.g., rent an apartment, buy a house or car, need an urgent loan, or maybe get hired for a job, etc.
All these tools have become extremely simple to access due to the boom in technology, internet and the concept of online banking. It is important to note that maintaining a positive credit history and good credit scores can certainly open doors.
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There are many resources, such as Experian boost UK that will make your journey to financial empowerment that much easier.
In fact, financial education and empowerment must be introduced and taught in schools to prepare better citizens and entrepreneurs.
Awareness is the key to secure a prosperous financial future, and ignorance is never an excuse.