Being financially intelligent means knowing how to manage, save, and invest money efficiently for you and your family. It contains different things like budgeting, investments, getting out of debt, real estate, insurance, college, and retirement planning. Financial intelligence is a subject that matters to almost anyone. Unfortunately, people are not learning enough about it. Without adequate financial education, peoples are unable to save for retirement, buy homes, or pay for unexpected expenses like car repairs.
What is financial intelligence?
Financial intelligence means having a basic understanding of issues related to money and finance, particularly someone’s finances. When you are financially literate, you will be able to:
- Pay your household bills
- Build a household budget
- Calculate how much you are paying for credit cards
- Open a bank account and keep track of your balance to prevent overdraft fees
- Check your credit score and take action to enhance it
- File an income tax return
- Open an account to save for college
- Figure out your net worth
- Shop for a mortgage loan
- Invest in a retirement plan
- Protect your personal information
- Spot a financial scam
Sadly, many people cannot meet this standard. Researches have shown that a majority of people worldwide lack the knowledge necessary to make routine financial decisions. Surely, it takes time and effort to improve your financial intelligence. However, when you invest in yourself, you begin investing in a better future.
Some good habits to enhance financial intelligence
- Concentrate on saving
Saving money is a great habit for people with high financial intelligence. Regardless of the amount of your income, become it into a habit to put aside part of your earnings each month. Put some money aside, it is crucial for your life since it encourages you to spend cautiously and also assists you to create a fund for emergencies. You will be able to fund your short and long-term goals with your savings, it prevents you to burden yourself with a loan or cut down your regular expenses.
- Assess your spending
Do you feel your money is slipping through your hands? It is time to check out where all this money is spending. The first step is making a daily, weekly, or monthly basis listing habit to put all your expenses on the list.
It will help you manage your finances better by assisting you to keep track of the expenses which are significant or not. Also, you can write a personal journal or diary to follow your daily expenses in case you have difficulty remembering where you spent your money.
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Make a scheme of your buying
Many people wish to buy some commodities that are more expensive than they can afford. This may be a new car, a new cellphone, furniture for the garden, jewelry; there is no end to the luxuries people wish. Although, you might want to get these immediately, a sign of financial intelligence is planning your buying and purchasing them after saving adequate money. In this way, you can prevent yourself from impulsive shopping, and in case you want to purchase something that falls outside of your budget, save up and then buy it.
Investing money is also a great habit besides that saving. By investing, you will be able to multiply your money, whether for the fulfillment of short-term goals or retirement planning. To invest money you can find various options around like real estate, currency, share market, fixed deposits, etc. To make good and steady returns while investing money, make sure you research enough on various aspects of the market you intend to dive into.
- Limit your credit card spending
In case you want to create and improve your credit score, having a credit card is good. But, when you plan to enhance your financial intelligence, we recommend you cut down the number of credit cards you have and use. When people own too many cards, they often lose track of all their spending. The figure that will be presented at the end of the cycle may through your whole budget off balance. If you continue this behavior, it would impact your financial stability in the long run.
- Take a loan only on necessary occasions
Today, because of the easy accessibility of loans, people can buy even luxury goods easily. Such a shopping behavior in long term would severely impact your financial health.
Only when there is an absolute need for a loan, consider taking it, and remember that your income must be adequate to manage the pressure of monthly installments.
- Read about personal finance
You can learn much more from a good book than personal experience after you have made mistakes. Great books from great authors are including Robert Kiyosaki’s “Rich Dad, Poor Dad”, Dave Ramsey’s “The Total Money Makeover”, David Bach’s “The Automatic Millionaire”, Beth Kobliner “Get a Financial Life”.
By reading these books you can improve your financial intelligence and also bring many common doubts about personal finance to the light. We also suggest you spend time reading blogs, articles, and magazines about personal finance and budgeting; they can give you the right tips and tricks for handling your finances the right way regularly.
Doing everything good seems intimidating at first!
You may not financially literate at school, but you can learn it. It requires spending some time and effort to peace financially. When you start performing healthy financial habits regularly you will be able to cope with all your financial goals.
We recommend you some “do’s” and “do not’s” to remember while embarking on your finance journey.
- Utilize the entire financial resources that are available
- Keep learning through taking classes and professional financial advisers
- Start budgeting and follow it
- Fear! You need to start from a point, and over time your finance will be stable.
- Do it alone. You can find many people including experts and advisers willing to help you.
- Limit your chances. Explore various skills and certifications to increase your job opportunities.
“If you have any feedback about how to grow your financial intelligence that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”
NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.