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15 Ways to Increase Your Financial IQ
Financial IQ is the ability to understand and manage your personal finances. It involves skills such as budgeting, saving, investing, and planning for the future. Having a high financial IQ can help you achieve your financial goals, avoid debt, and live a more comfortable and secure life.
But how can you increase your financial IQ? Here are 15 ways to do so:
#1. Read books and articles on personal finance.
There are many resources available online and offline that can teach you the basics and advanced topics of money management. Some of the popular books are Rich Dad Poor Dad by Robert Kiyosaki, The Richest Man in Babylon by George Clason, and The Total Money Makeover by Dave Ramsey.
#2. Listen to podcasts and watch videos on personal finance.
If you prefer audiovisual learning, you can find many podcasts and videos that cover various aspects of personal finance. Some of the popular podcasts are The Dave Ramsey Show, The Money Guy Show, and ChooseFI. Some of the popular YouTube channels are Graham Stephan, The Financial Diet, and Minority Mindset.
#3. Take online courses and quizzes on personal finance.
If you want to learn in a more structured and interactive way, you can enroll in online courses and quizzes that can test your knowledge and skills in personal finance. Some of the popular platforms are Udemy, Coursera, and Khan Academy.
#4. Follow personal finance blogs and influencers.
If you want to get tips, insights, and inspiration from experts and peers who are passionate about personal finance, you can follow personal finance blogs and influencers on social media. Some of the popular blogs are Mr. Money Mustache, The Simple Dollar, and Money Under 30. Some of the popular influencers are Ramit Sethi, Suze Orman, and Robert Kiyosaki.
#5. Join personal finance communities and forums.
If you want to connect with other people who are interested in personal finance, you can join personal finance communities and forums where you can ask questions, share experiences, and learn from others. Some of the popular communities are r/personalfinance, r/financialindependence, and r/FIRE. Some of the popular forums are Bogleheads, MoneySavingExpert, and Personal Finance Club.
#6. Track your income and expenses.
One of the most important steps to increase your financial IQ is to track your income and expenses. This will help you understand your cash flow, identify your spending habits, and find opportunities to save more and spend less. You can use apps, spreadsheets, or journals to track your income and expenses.
#7. Create and follow a budget.
Another important step to increase your financial IQ is to create and follow a budget. A budget is a plan that allocates your income to your expenses, savings, and investments. A budget will help you live within your means, prioritize your needs and wants, and achieve your financial goals. You can use apps, spreadsheets, or envelopes to create and follow a budget.
#8. Build an emergency fund.
An emergency fund is a savings account that covers unexpected and urgent expenses, such as medical bills, car repairs, or job loss. An emergency fund will help you avoid going into debt, reduce your financial stress, and protect your long-term financial health. You should aim to save at least three to six months of your living expenses in an emergency fund.
#9. Pay off your high-interest debt.
High-interest debt, such as credit cards, payday loans, or personal loans, can eat up a large portion of your income and prevent you from saving and investing more. Paying off your high-interest debt will help you save money on interest, improve your credit score, and free up your cash flow. You can use strategies such as the debt snowball or the debt avalanche to pay off your high-interest debt.
#10. Save for your short-term and long-term goals.
Saving for your short-term and long-term goals will help you achieve your financial dreams, such as buying a house, traveling the world, or retiring early. Saving for your goals will also help you stay motivated and disciplined with your money. You should set SMART (specific, measurable, achievable, relevant, and time-bound) goals and save a percentage of your income every month for them.
#11. Invest your money wisely.
Investing your money wisely will help you grow your wealth, beat inflation, and reach financial independence. Investing your money wisely involves choosing the right asset classes, such as stocks, bonds, real estate, or commodities, diversifying your portfolio, and holding your investments for the long term. You can use platforms such as Robinhood, Vanguard, or Acorns to invest your money wisely.
#12. Increase your income.
Increasing your income will help you accelerate your financial progress, as you will have more money to save, invest, and spend. Increasing your income involves finding ways to earn more money, such as asking for a raise, switching jobs, starting a side hustle, or creating a passive income stream. You can use platforms such as Upwork, Fiverr, or Etsy to increase your income.
#13. Reduce your expenses.
Reducing your expenses will help you boost your savings rate, as you will have more money left over after paying your bills. Reducing your expenses involves finding ways to spend less money, such as cutting out unnecessary subscriptions, shopping around for better deals, or adopting a minimalist lifestyle. You can use platforms such as Mint, Trim, or Rakuten to reduce your expenses.
#14. Learn from your financial mistakes.
Learning from your financial mistakes will help you avoid repeating them and improve your financial IQ. Financial mistakes are inevitable, but they are also valuable lessons that can teach you what works and what doesn’t work for you. You should acknowledge your financial mistakes, analyze what went wrong, and take corrective actions to prevent them from happening again.
#15. Keep learning and improving.
The last and most important way to increase your financial IQ is to keep learning and improving. Financial IQ is not a fixed trait that you are born with or without. It is a skill that you can develop and enhance over time. You should always seek new knowledge, challenge yourself, and adapt to changing circumstances. You should also celebrate your financial wins, no matter how big or small, and reward yourself for your hard work.
