Increase Your Financial IQ For Fun And Profit

By Enid Hinton

Studying can often be a bore. However, almost everyone likes learning about, talking about, dreaming about, and fussing with money. This makes studying finances more fun than other subjects may be. Researching how to increase your financial IQ can be enjoyable and absorbing.

There is a lot of information available in books, online articles, radio talk shows, news reports, and counseling sessions with financial advisers. Often the advice is contradictory, which confuses and may discourage a lot of people. However, there are some basic rules that help lay a foundation for future improvement. Some of them are as old as the Bible.

The first step is, of course, to have some money to manage. People who live paycheck to paycheck, spending their income as fast as they get it, are not in a management position. There are some basic tools to help with this situation, as well as tried and true advice.

A budget will help make whatever money there is go farther. Categorizing expenses and allotting income to these categories (with savings thrown in) is the first step to even understanding where your money goes. Good management can make any amount of money go farther. Sometimes people who think they couldn't save a penny are surprised to find that they can save ten percent of their income or more.

It's surprising how many people have no idea where their money goes. They get it at set intervals, and it seems to vanish into thin air. Most people can detail fixed expenses like rent or mortgage payments, utility bills, and child support. They may not know the total of such recurring payments, however, or know what percentage each category consumes. They also may not know if their expenses are reasonable - in keeping with conventional wisdom - or way out of line.

Things not in these categories are areas in which you will have more discretion. Food is something you cannot do without, but you can buy wisely or foolishly. The same thing applies to clothing, recreational spending, and household supplies. Attention paid to detail can mean a bit of money left over after everything is taken care of.

This surplus should be saved in an emergency fund. It doesn't have to be huge, but even a little comes in handy when, for example, you spill indelible ink all over your work clothes and need to buy new ones. Without savings, you are forced to commit the heinous crime of using credit (gasp.) This is a no-no for the financially savvy, since it increases the cost of everything purchased and adds one more monthly bill to the whole.

Budgeting - a truly valuable skill and one which many resist practically to the poor house door - and saving make the foundation of financial wisdom. Then other things come into play, like investing, saving for a happy retirement, tax shelters, and goal setting. This is when it really gets fun, and your money matters IQ will grow by leaps and bounds.

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