In our last blog on finances, we shared some important Tips for Managing Your Cash Flow. Managing your cash flow is the first step towards feeling empowered with your money. What does it mean to be empowered? To be empowered is to have the knowledge, confidence, means, or ability to do things or make decisions for oneself. So, the first step towards financial empowerment is knowledge.
Know and Understand your Current Financial Situation
You can’t feel empowered and confident about your money if you don’t know how you’re spending it. As I shared in my previous blog, keeping a spending diary really helps. This is how you will become conscious and aware of your spending habits. As you get good at tracking each month, you will develop an overview of your monthly, quarterly, and annual income and spending habits, by category. Knowledge is power. The more you know and the more aware you are of your spending, the more control you will have over your finances.
Create a Budget
Creating a realistic financial plan which includes a budget is especially important. Even more important, is to stick to it. Practice precision when creating spending categories – such as housing, utilities, food, education, and entertainment. I say practice because it will take practice to create and maintain a budget that works for you. Especially if you are used to purchasing the things you want on credit. That feeling of instant gratification takes time to let go of. Create spending limits for each category. It may mean making some significant life changes and some sacrifices, there may be some discomfort at first, and you will get through it. Know that because you are the person creating the budget, you can always come back and adjust it to better suit your life, your needs, and your interests. Remember to take care of future you, put some money aside! The result – your financial freedom – will be well worth your efforts!
Make a Commitment to Reducing Debt
If you are heavily in debt, it is important to understand how you got into debt in the first place. Once this is clear and understood, commit whatever amount you can – however small – to making monthly payments and decreasing your total debt. Make your goal to use 30%, or less, of your available credit. It could take months, or years, to reach this goal. That’s okay. Slow progress is still progress. As your debt decreases, you will find yourself getting closer and closer to the home stretch. Use your feeling of accomplishment to tackle the next debt on your list until you are complete. I suggest that while you pay all of your bills monthly that you focus on paying off one debt or bill at a time by devoting more to it than just the monthly payment due every single month.
Invest in Your Future
Prioritize investing your time and money on something that will improve your future, as opposed to buying things that only provide temporary gratification. Examples of this would be getting an education or professional training, attending a conference, getting a new computer for work, or buying books that increase your knowledge.
Acknowledge and celebrate each achievement – however small. If you paid off a credit card, saved $1,000, chose to save for that new toy you want instead of putting it on a credit card – that’s MASSIVE. Give yourself a pat on the back! Tell your buddies! Dance around! Enjoy your accomplishments!! Creativity in your celebrations will not only feel good, it can support you in making choices to celebrate without running up debt.
In time, you will have paved the way for financial empowerment. As you take more control of your finances, you will see doors in all aspects of your life begin to open for you. All the time and energy spent on financial worries can now be spent on creating a brighter future for yourself.