Raise Your Financial IQ
It’s the first step to lowering your debt, increasing your savings and reaching your goals
Most people make the mistake of thinking that their life would be improved if only they had more money. Not true. It’s what you know about money and what you do with it that leads to success.
The U.S. Treasury Department’s Advisory Council defines financial literacy as the ability to use money skills and knowledge to effectively manage your resources for a lifetime of financial well-being. Having a low financial IQ leads to higher levels of debt, lower amounts of wealth and a boat load of stress.
As a nation, how do you think we are doing with regards to our knowledge about money? Not nearly as good as we think.
American Financial Literacy
Nearly half of all American adults who considered themselves pretty good at math were unable to do two calculations involving interest rates and inflation according to a 2009 FINRA report. The average household lives with a credit card debt of $15,611 and a mortgage debt of $155,192, with student loans averaging $32,264. More than half of us (56 percent) have no ”˜rainy day funds’, and there’s a $6.6 trillion gap between what we are saving and what we should be saving for retirement.
As an individual, how does your situation compare with these statistics? Whether good or bad, if you are motivated to learn about money, then you can take the first steps toward positive action. These first steps – recognized by National Financial Literacy Council as one of the most critical components of financial literacy – create positive momentum, lead to a higher financial IQ and a more secure future.
First Steps To Raising Your Financial IQ
What do these first steps look like? In recognition of financial literacy month, take responsibility for raising your financial IQ by following through with these first steps:
#1: Know Your Numbers: Most people make the mistake of trying to stick to a budget without first knowing what they have to work with. No matter how bad it is, you can’t fix it until you first identify the problem. Take a minute to get clear about your numbers.
Create two financial statements – the balance sheet and the income statement – to give you a current snapshot of where you stand. Use the Income statement to identify what’s coming in and what’s going out every month. Use the balance sheet to calculate what you owe against what you own. Ask your financial professional for basic financial worksheets or download your complimentary documents right here!
#2: Ask Questions of Successful People and Qualified Professionals: If you know what you need to work on, find someone who will sit down with you and offer objective, unemotional advice. This person might be someone successful whom you admire, or they might be an independent advisor in your community. Financial professionals committed to helping you build a plan for your financial future don’t charge anything for a first meeting.
3#: Set Up Accountability: To help you stay on your plan, set up regular meetings with someone who will hold you accountable for your goals. This person could be a spouse, business partner, financial advisor, bookkeeper, accountant, coach, or anyone you trust to schedule an appointment, show up, and hold you accountable. Life changes and shift happens, which is why it’s often necessary to review and update your plans. Meeting monthly is amazing, quarterly is good, and even annually is better than most.
The end of the month is fast approaching. Don’t let money change what your dreams look like. Raise your financial IQ and take that first step today.
Test Yourself! Take the National Financial Capability Test
The President’s Advisory Council on Financial Capability
National Financial Literacy Council: Statistics and Impact
American Household Credit Card Debt