How Does Your Financial IQ Stack Up?

Understanding how your finances work is one of the first steps in getting to a financially free life. However, in order to get there you have to first learn what you do not know. This is where understanding your financial IQ comes into play. You may also want to first understand what a financial IQ is to begin with.

Understanding Your Financial IQ

Your financial IQ is not a predetermined value. It can change as you grow older, and can either increase or decrease. Your IQ is not determined by how well your stocks perform in the markets or whether or not you are able to have your own private yacht. In fact, someone with the highest financial IQ can make only $20,000 a year. Your financial IQ is derived by how well you are able to manage the money you have. Thus, you can have very little but still understand how each cent is being used to help you survive.

How To Measure Your IQ

Although there is no set test similar to MENSA to quantify your financial IQ. However, there is a quick assessment you can do to gauge where you might be. The first question is simple, do you have a working budget that you frequently use and adhere to? Next, do you have an emergency fund for both ad-hoc and 6 months of expenses? Lastly, do you have a working retirement plan setup with more than just your 401k? These are three simple questions, but for many they are very difficult to answer.

Improving Your Financial IQ

Although you may have had trouble with those questions, please understand it is not the end of the world. You may be wanting to get better but do not know where to begin. To increase your financial intelligence, you can take some simple steps to begin to increase it. One of the first steps would be to read about personal finances. This blog is a wealth of knowledge, but there are also TONS of other resources on the internet. The next step is crucial. You have to work through the steps to get your financial foundation in order which includes a working budget, emergency funds, and a retirement plan. They are some of the simplest things you can do to get started and increase your financial IQ. Most importantly, you have to WANT to learn more and be proactive in your approach to understanding how to manage your finances.