How to Increase Financial IQ – Financial intelligence has a lot to do with making the right financial decisions depending on the situation you’re in. And understanding the basic financial fundamentals is just the first step towards meeting all your financial goals. You probably already have a rough idea of how to handle finances. From here, the next step is to boost your financial intelligence to improve your ability to gain wealth and manage it properly. It’s also worth knowing that, having a higher financial IQ improves your potential to earn, your quality of life, protects your financial portfolio, secures retirement funds, and also provides financial security. And of course, it’ll take time and effort to increase your financial IQ, but when you decide to invest in yourself, you begin to invest in a better future.
How to Increase Financial IQ
1. Read up on personal finance
If you want to make better financial decisions, there are plenty of resources available to assist you. All the tools you may need to succeed are within your reach. You can pick up your morning paper or turn on the radio and listen in on all the things going on in the financial market. You’ll be informed on whether interest rates are expected to go up, or down, and whether any changes in the government policy will affect certain aspects of the economy.
If you need more information, you can always visit the bookstore, local library or look something up on your phone or laptop to get what you need. The resources are out there if you look for them. Just think about the financial subject you’re trying to improve and continue from there. If you’re looking to learn more about budgeting or investing or maybe emergency saving funds, there are books out there with information about them. Some of the highly recommended books, to begin with, include Rich Dads, Poor Dad, by Robert Kiyosaki, and The Total Money Makeover, by Dave Ramsey.
Keep in mind that everyone’s financial situations are different, so some tips may not apply to you. Nonetheless, always keep an open mind. The whole point of exploring your resources is to learn and see what works for you. Having all this information though
can make it a little bit harder for you to make your financial decisions. It can even complicate matters. There are so many resources that you can’t possibly pay attention to all of them, so it’s upon you to decide which ones are more important and reliable.
2. Assess your current financial situation
What does your current financial situation look like? If you don’t have a clue, start by checking your bank statements to find out how much you have and how much you owe. Doing this can be a bit intimidating, but remember you’re doing this to improve yourself, so don’t feel discouraged. Also, ensure you create a list of all your assets and what they’re worth because this helps determine what your net worth is.
Tracking this value allows you to understand how your income affects your net worth and exactly where it’s going. You get to see how your liabilities change over time and whether your net worth has been increasing or not. You can work out your net worth by subtracting your liabilities from the total sum of all your assets.
It’s not enough to know how much you make. You should also know what your net worth is because only keeping track of what you earn doesn’t give you the full picture. You won’t be able to know your true financial worth by relying on your income alone, as it won’t tell you whether you’re in debt or if your wealth is growing.
3. Track your spending
When you start to feel as though money is slipping through your fingers like grains of sand, it might be time to figure out where all the cash is going. Knowing how much cash you have in the bank isn’t enough, you still have to track your money. Tracking your spending is beneficial to you because it helps you to better manage your finances by helping you keep track of all your expenses and sort out which ones are significant and which you can probably live without.
Make a point of knowing which kind of purchases you’re making, for example, for food, entertainment, clothes, and so on. If there appears to be an exceedingly high expense, try and look for ways to cut back. And if you have trouble remembering where you spend your money, you could always use a journal or diary to help you keep track of all the daily expenses.
Once you know the kind of expenses you make, create a budget. You’ll be able to maintain financial stability by allocating specific amounts for your monthly expenses and setting aside cash for other things.
So, it’s always tempting to spend on certain luxuries. We all have something we’d like to buy, and some of them are way beyond what we can afford. A new car, electronics, jewelry, designer clothes, you name it. The list is endless. You might want to buy these items as soon as possible, but planning for purchases and going through with them after saving up enough, is a clear sign of your growing financial IQ.
The point here is to try and keep your impulse buying tendencies at bay, and whenever you set your eyes on something that doesn’t lie within your budget, save up for it then buy it without affecting your financial state. Impulse purchases will lead you further away from your monetary goals. That’s why your financial goals need to be at the forefront before you think about buying one thing or the other.
4. Enlist financial help to boost your intelligence
So far, you’ve been gathering information and doing things on your own, but it can be hard in the beginning. So when all this gets a little overwhelming, you could always enroll in finance classes or seminars that can help you learn more about money. But if school is not an option at the moment, and you’re trying to get your finances in order, it’s advisable to seek out the advice of a professional. This would be important, especially if your financial situation is a bit complex, as in the case of investments, which may require their expertise. With their vast array of knowledge in all things finance, financial advisors can help you manage your finances better.
Seeking the services of a professional also helps you calculate the correct amount you need to pay, see how you can claim rebates, and even save on taxes. A tax planner can help you pay the smallest tax bill and minimize taxes in the future without breaking the law. Remember that no one expects you to know everything. There’s nothing wrong with seeking help as long as you’re willing to learn.
5. Invest in yourself
Investing solely in personal finance courses isn’t the only way to increase your financial IQ. You can improve your financial prospects by investing in yourself and your skills. Having a few extra skills and certifications couldn’t hurt. They can help you stand out, especially with how the job market has become so competitive nowadays. You might have to pay to enroll in a certification course, but it could benefit you in the long run. You may even get a better, higher-paying job. Just do some research on which certifications best suits you.
Networking is another aspect that can improve your financial intelligence and expand your financial literacy. It helps a lot to grow and maintain a network of people who are financially adept and have an abundance of financial advice to offer. A good network would typically consist of friends, family members, and other people whom you’ve met through a social event or any other way.
You never know, an interaction can lead to a new career or financial assistance when you’re in a tough spot. You open yourself up to several prospective opportunities by keeping your options open and networking far and wide. If you need investment or credit advice, for example, someone in your circle could probably offer their insight from experience and help you make wise investment decisions or improve your credit score. By asking a few questions, your financing journey can be off to a great start.
7. Focus on saving
It’s no surprise that saving is a common practice for people who have a high financial IQ. Regardless of how much you earn, make a habit of putting something aside every month in the form of savings. It’s important to save at every stage of your life because it encourages you to spend wisely and also helps you to set up a fund, to be used in emergencies. You can easily fund your short and long-term goals with your savings without having to be burdened with a loan or messing up your regular expenses.
Saving money, whether, for short-term goals, retirement, or investing is a great habit to cultivate. If there’s an area you’d like to invest in, there are so many options to choose from, like real estate, the stock market, fixed deposits, currency, etc. But before investing your money anywhere, ensure you do all your research first and find out the ups and downs of the market you’re planning to get into, to make good and steady returns at the end of the day.
8. Commit to Healthy Financial Habits
Setting out on your journey to financial stability is a huge commitment, and it will take a lot before you get there. It’s not always going to be easy. You’ll have to remind yourself not to splurge on things and focus your efforts more on saving for your long-term goals rather than overspending. It doesn’t take much for us to indulge and spend money on all the things we want because we tend to think that we have enough cash, but life isn’t always as smooth.
It can throw you a curveball you didn’t see coming, like a car accident or losing your job. Life is difficult, and some things are just out of our hands, and instead of focusing on the things that we can’t control, we should focus on those that we can. It takes a high level of financial IQ to take the finances you have right now, and invest them safely for when something unexpected comes up.
Whatever doubts or mixed feelings you have about finances, shake them off. And if you commit to implanting healthy financial practices, your financial IQ will drastically improve. It’s going to take some time but remember that the race to financial stability isn’t a sprint, but a marathon.