Five Steps to Money EmPOWERment

Source: Image by Peggy und Marco Lachmann-Anke from Pixabay

Wow―people do get anxious at the thought of going mano-a-mano with their personal finances. I just heard that 26% of Americans would rather go to the dentist than talk about their debts; that’s from a new survey by Freedom Debt Relief. I’m not even talking about the anxiety that comes with not having enough money. I’ve met plenty of people who are high earners and not cash-strapped or over-extended but still can’t quite get a handle on all of the pieces.

No question, personal finance is a complicated matter. You know that you should budget, save, invest, but might still get heart palpitations over making big-picture money decisions. That’s decisions such as: How much do you actually need to save for retirement? Should you pay off your mortgage as fast as possible or it is better to accumulate cash? How do you know if you’re doing the right thing for yourself and your family long-term?

It’s complicated, but by no means impossible. The difference between those who feel confident about making these life-altering decisions and those who don’t is something I call Money Empowerment.

It’s about breaking your money questions down to smaller pieces and having goals that you really care about. It’s something you can’t get from a book or even from financial literacy training because your goals are yours alone, and have everything to do with your family situation, your career path, where you live, and your personality and passions. But you can gain Money Empowerment. These five steps will help you gain the confidence and understanding you need to be more empowered and less stressed out:

Step 1: Begin with your goal(s). What MUST happen to assure that you feel like you’re moving in the right direction? What is really vital to you and your family? It might be retirement, funding college, or eliminating debt. But it’s your MUST, no one else’s. There can be no judgments or consideration of anyone outside of yourself and the stakeholders involved. Write down those MUSTS and make them positive statements. For example: I MUST save $50 from every paycheck in order to build my emergency fund. Make it personal, meaningful and specifically yours.

Step 2: Know your numbers. You can’t make decisions unless you have a clear understanding of what’s coming in and what’s going out. Your knowledge needs to extend to the total of your financial life. How much is going to your 401(k)? How much does your insurance cost? What do your utilities run you each month? Your power comes from your ability to make decisions that go beyond immediate wants.

Step 3: Have a vision of the big picture. Imagine your life as a giant jigsaw puzzle. It consists of a thousand interlocking pieces, and trying to put them together feels overwhelming unless you have a clear view of what the end result should be and a system for creating the finished product. Have a game plan and a system that will support your goals. You might need the help of a financial professional to set you on your path. Stay focused, and keep checking whether your decisions are bringing you closer to your MUSTS or further away.

Step 4: Expect mistakes and bumps. You might count on a certain return on your investments or you might expect a promotion or raise. But sometimes the market tanks or someone else gets the promotion you thought you had in the bag. Life happens. Your plan has to be flexible enough to withstand minor bumps or mistakes. Just as one piece of cake shouldn’t crash a diet, a bad decision or unfavorable situation shouldn’t kill your plan. Consider, in advance, what could go wrong and how you can protect yourself. That usually means some backup savings that you label untouchable except in an emergency. It can also mean maintaining an active network just in case you decide a new job is what you need to get back on track.

Step 5: Celebrate success. If putting $50 per paycheck into savings brings you closer to your goal, celebrate it and acknowledge each deposit as a positive step forward. Find opportunities to recognize each positive step forward.

It’s in your power to become the master of your money, rather than vice versa. I’d love to hear your success stories or the challenges you face.