Create Your Own Financial Empowerment

Are you looking to gain control of your finances and build a better future for yourself? Then you might want to consider pursuing financial empowerment. In this blog post, we’ll discuss financial empowerment, what it means to achieve it, the criteria you need to meet, and the steps you can take to get there.

Table of Contents

• What is Financial Empowerment
• What Does it Mean to Achieve Financial Empowerment
• Criteria to Have Financial Empowerment
• Steps to Take to Start Getting Financially Empowered
• Beginner Financial Accounts To Have 

What Is Financial Empowerment?

What Does It Mean to Achieve Financial Empowerment?

Achieving financial empowerment means taking control of your financial life. What does that look like? For starters, be real with yourself. Stop denying that you’re in financial trouble. You have money problems, and that’s ok. Realizing you can’t fix your problem is the first step toward a brighter future. 

Financial empowerment can be different for everyone. Think about what it means to achieve financial empowerment for yourself. Does it mean buying a car? No longer getting calls from collectors? Buying a house? Having extra income at the end of the month?

Achieving financial empowerment means knowing where your money is going, clearly understanding your financial situation, and feeling confident in your ability to manage your money effectively.

Let’s take a look at a real-life scenario:

It’s never too late to learn

I’m totally new to this whole experience – I’m in my 80s and never had any formal training in money management. You guessed it ……yep struggled my whole life living from paycheck to paycheck, spending money I didn’t have. I was never in dire trouble but was stressed all the time juggling to meet my bills and do not have sufficient retirement money. Relying on my kids for some help. My point is “It’s never too late to learn”.This program is so thorough and easy to follow. It is a very positive experience.

Criteria to Have Financial Empowerment?

Although financial empowerment can be different for everyone, here are some criteria you can think about whether you are “financially empowered”:

1. Clear Understanding of Your Financial Situation: You need to have a clear understanding of your financial situation, including your income, expenses, savings, and debts.
2. Loan Reduction: You need to reduce any money you owe so you’re not saddled with high monthly payments.
3. Budgeting: You need to create and stick to a budget that helps you save money, meet your financial obligations, and still have some extra cash for discretionary spending.
4. Savings: You need to prioritize savings and consistently set aside money for your goals.
5. Financial Education: You need to invest in your financial education by reading books, taking courses, and consulting with financial advisors.
6. Continual Improvement: You need to remain committed to continually improving your financial literacy and developing new financial skills and habits.

Steps to Take to Start Getting Financially Empowered

Now that you know what financial empowerment is and what it means to achieve it, what steps can you take to get there?

Steps to take to start getting financially empowered

1. Assess your current financial situation
2. Reduce and eliminate expenses
3. Build an emergency fund
4. Invest in your financial education

Assess your current financial situation: 

Assessing your current financial situation is the first step to achieving financial empowerment. It involves taking stock of your income, expenses, money owed, and savings. To begin, you should create a comprehensive list of your monthly income from all sources. Next, you’ll need to list all of your monthly expenditures, including rent or mortgage payments, utility bills, groceries, transportation costs, entertainment expenses, and any other bills. This process will help you identify areas where you’re overspending and need to make cuts. Once you know your monthly expenses, you can compare this to your net income to determine your disposable income. Finally, you’ll want to calculate your net worth by tallying your assets and subtracting your liabilities, like credit card balances or loans.

This is an essential component of understanding your financial health, as it can help you track your progress as you work toward your short and long-term financial goals. By assessing your current financial situation, you can develop a clear picture of your financial standing and make informed decisions about where to allocate your spending and savings to attain financial empowerment.

Reduce and eliminate expenses

Reducing and eliminating expenses is a crucial step in achieving financial empowerment. It involves making smart choices about your spending that will help you save money over the long term. Here are some tips to help reduce and eliminate expenses:

Create a budget: Creating a budget is one of the most effective ways to reduce expenses. By carefully tracking your income and expenses, you can identify areas where you may be overspending and make adjustments accordingly.

Cut unnecessary expenses: Look for expenses you can cut from your budget immediately, such as subscriptions or memberships you’re not using or cutting cable TV.

Re-evaluate your bills: Take some time to renegotiate some of your bills like your car insurance, mobile service provider and internet service provider. This will help you reduce your bills.

Shop around: When shopping for groceries or other necessities, take the time to shop around for the best prices. You can also look for discounts, coupons, and deals whenever possible.

Avoid impulse purchases: Impulse purchases can add up quickly and can derail your financial goals. Before making a purchase, ask yourself if it’s something you really need or can easily live without.

Build an emergency fund

Building an emergency fund is an important component of financial empowerment. Emergencies like job loss, medical bills, car repairs, or any other unexpected expenses can happen at any time, and having an emergency fund can help ensure that you’re prepared to handle them.

To build an emergency fund, start by setting a goal for how much you want to save. Aim to save at least three to six months’ worth of living expenses to cover you in case of a job loss or other emergency. You can gradually work towards this goal by setting aside a portion of your income each month. Open a dedicated savings account to hold your emergency fund, this should be separate from your regular accounts so the temptation to spend it is not present.

You can also utilize strategies like automating a portion of your paycheck to go into your emergency fund every time you get paid. Try to keep the emergency fund in a liquid and easily accessible account without steep account closure or withdrawal fees. As an example, a high-interest savings account. This type of account often has a minimum balance required to get the best rate possible. You can align this right along with your target emergency fund and gamify the process! Once you’ve reached your target, continue contributing to the account regularly to replenish any funds that you may have used in an emergency.

Invest in your financial education

In addition, you can also take courses through local colleges or universities or attend webinars about personal finance planning. These are great opportunities to connect with other learners and get valuable insights from expert financial educators. Networking with people who have similar financial goals as you do can also provide insights into how they manage their finances, and which strategies they utilize. Another important means of developing your financial knowledge is to stay updated on trends happening in the financial industry, by subscribing to reputed personal finance websites and newsletters. By continuously investing in your financial education, you can develop the knowledge, skills, and tools necessary to take control of your financial life and achieve long-term financial empowerment.

If you’re looking for an online platform, use Canfi! Many Canadians do not have the resources to navigate challenging financial situations and find themselves caught in cycles of working, borrowing, and repaying to stay afloat. CanFi provides Canadians with the tools and education to better understand and take control of their finances. It is never too late to get the financial education everyone deserves. CanFi Empowerment Education provides the education, mentoring, and guidance to make better financial choices and improve financial literacy.

Create a plan to achieve your financial goals

Creating a plan to achieve your financial goals is a critical step in your journey toward financial empowerment. Start by identifying your short-term goals, like saving up for an emergency fund, paying off a credit card balance or a small loan, etc. In contrast, a long-term goal may include investing your money, building up a retirement fund, purchasing a house or car. Once you have identified your goals, determine how much money you will need and how much you will need to save each month to meet these goals.

Next, set a timeline for each goal, and prioritize them as per your requirement. You may find it helpful to break the larger goal amounts into smaller sizes, with monthly saving and investing targets. Find different ways to motivate yourself regularly, by tracking your progress or rewarding yourself when you have met a particular goal. Give yourself an incentive to push ahead, but also avoid discouragement if you have when you encounter setbacks or unforeseen expenses.

Finally, review your plan regularly, and be open to making adjustments as necessary. Financial needs and goals can change over time, so it’s essential to be flexible and adjust your plan accordingly. Remember, goal setting plays an important role in achieving your financial objectives. By creating a clear plan, breaking down long-term financial goals into short-term steps, and remaining flexible, you can take control of your financial life and work towards achieving your desired financial situation.

Initial Budgeting Tips

The 50/30/20 Rule

The 50/30/20 rule is a personal finance budgeting approach that aims to help individuals manage their income more effectively. The rule suggests that after-tax income should be divided into three categories: essentials, discretionary spending, and savings. 50% of the after-tax income should go towards the essentials, including housing, utilities, food, and healthcare expenses. Discretionary spending, such as entertainment, dining out, and non-essential shopping, should be limited to 30% of the after-tax income. Finally, the remaining 20% should be directed toward savings and investments. This is a general rule of thumb, and you can adjust it according to your goals and priorities.

To use the 50/30/20 rule realistically, you need to determine your monthly net income first. Then, you need to figure out your regular essential expenses such as rent/mortgage payments, utilities, groceries, etc. Once you have determined your essential expenses, you can allocate 50% of your income to cover these costs. Next, you need to allocate 30% of your after-tax income towards discretionary spending, such as entertainment and personal grooming. Finally, 20% should be reserved for savings and investments. Ideally, this 20% should be in a separate account from your main account, making it easier to stick with your savings goals.

Set Target Behaviours, Not Spending Numbers

As you also know, creating a comprehensive budget can be tough as well. Should you have a line item for everything? Should you save ahead for that random present you buy your wife or husband? How much do you spend on clothes in a year? What about the expenses you don’t expect—such as visiting a family member if they suddenly need help?

For example, your target spending might look like: 

1. $150 for restaurants
2. $50 for fast food
3. $40 for coffee and cafe visits
4. $30 for ice cream and treats for the children
5. $50 for a beer with the boys
6. $50 for rosé with the girls. 

Instead, list out some behaviours that you want to start implementing. Here are some target behaviours you can have printed on your fridge. Ensure you choose behaviours that align with your financial goals and budget. 

For example, this is what your target behaviours can look like: 

1. Treat yourself to a dinner out, but only once per week. 
2. Take a packed lunch to work daily, but treat yourself to bought lunch on Fridays. 
3. Pack lunches for weekend day trips.
4. Treat yourself to Starbucks, but only on the weekend. 

Beginner Financial Accounts To Have 

Checking Account

High-Interest Savings Account

A high-interest savings account is a type of bank account that offers a higher interest rate than a traditional savings account. Typically, these accounts have fewer fees and restrictions compared to other types of accounts. People should consider having a high-interest savings account because it allows them to earn more on their savings while still having easy access to their money. Unlike investment accounts, high-interest savings accounts offer a guaranteed return, making them a safer option for those who may be hesitant to invest in riskier options. Additionally, the interest earned on these accounts can help offset the impacts of inflation on savings over time. Overall, a high-interest savings account can be a smart financial move for anyone looking to earn more on their savings without taking on too much risk.

Tax-Free Savings Account

A Tax-Free Savings Account (TFSA) is a type of registered account that allows Canadians to save and invest money without paying taxes on any earnings or withdrawals. Unlike a Registered Retirement Savings Plan (RRSP), contributions to a TFSA are not tax-deductible, but the contributions and earnings within the account are tax-free and can be withdrawn at any time. TFSAs have an annual contribution limit, and unused contribution room can be carried over to future years. Someone can use a TFSA to save for any goal, such as a down payment on a house, a vacation, or retirement. They can hold a variety of investments within the account, including stocks, bonds, mutual funds, and GICs. Overall, a TFSA is a powerful tool for Canadians to grow their savings and investments while minimizing their tax burden.

Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is a type of registered account that allows Canadians to save for retirement in a tax-efficient way. Contributions to an RRSP are tax-deductible, meaning that they can reduce the amount of income tax payable in a given year. The investments held within an RRSP grow tax-free until withdrawn, making them a powerful tool for long-term retirement savings. RRSPs have an annual contribution limit, which is based on a percentage of the individual’s previous year’s income, and unused contribution room can be carried forward. Someone can use an RRSP to save for retirement and to take advantage of the tax benefits it offers. In retirement, withdrawals from an RRSP are subject to income tax. Overall, an RRSP is an excellent way for Canadians to save for retirement and to take advantage of the tax-deferred growth of their investments.

Conclusion

Financial empowerment is achievable if you’re willing to put in the work and stay committed to continual improvement. Remember, it’s not about how much money you have, it’s about how you use the resources you have to achieve your goals.

Take this opportunity to improve your financial situation and change your life forever.