Have you ever taken a test to evaluate your financial IQ? In the good old days, we used to have home economics classes in high school. Also called family and consumer sciences (often shortened to FCS), this is a subject concerning human development, consumer issues, housing and interior design, nutrition and food preparation, textiles and apparel, as well as personal and family finances.
How you manage your money will determine how successful you are at hitting your financial and other goals in life. Buying a house, having kids, paying off your student loans, or whatever else you’d like to do can require a change of attitude, mindset, and behavior.
Whether you’re looking to save more, invest wisely, or simply gain a better understanding of your finances, this knowledge is of the utmost importance.
So here are a few tips to boost your financial IQ!
1. Look at your transactions and statements
Every day and every month! Log onto your bank account to stay on top of your balances. This will greatly enlighten you! Many banks offer personalized spending and saving tools, available online or you can download an application on your mobile phone.
And don’t forget about your monthly bank statements. It summarizes all of your monthly transactions to further help you keep track of where your money is going. They help you do your budget.
2. Make a realistic budget
A budget is the basis of any useful financial plan. Give every dollar a purpose so you know that your fixed expenses are covered monthly. Evaluate how much you spend on groceries, gas, restaurants and other regular expenses to set some parameters. By balancing and limiting these expenses, you’ll create the financial order necessary to save effectively.
There are many budgeting strategies out there, from simple to more complex, so it’s best to decide how much time and effort you want to commit. That’s why it’s so important to determine which money management style will be best for you, so that you can stick to it long term.
3. If you want to boost your financial IQ, you must think about your objectives
Think about what you want to achieve with your money. Which goals do you want to achieve in the short term? Which ones are long term? Then you can tailor the appropriate financial plan to meet your goals and figure out what financial tools are available to help you be successful.
4. Stay on top of your credit score
TransUnion and Equifax can each provide a free credit report once a year, upon your request. Also, periodically check your credit score to notice any changes. Your credit is a big deal, so keep a close eye on it.
5. Shift your thinking
The future can be a scary thing to think about, especially when it comes to money. So make decisions today that will positively impact your life tomorrow. Think about the long game and make your future goals a priority.
6. Develop a habit of saving and investing
Do you have any idea of how much or how often you save? What about investing? By building a saving and investing plan — directly into your budget — you can make these practices part of your routine. Doing this through automatic deposits makes it even easier.
7. Become introspective
You have to be honest with yourself. Are you respecting your budget? Are you spending too much on senseless things? Sometimes the path to financial wellbeing starts by looking inward and identifying wants versus needs.
8. Stop procrastinating if you want to boost your financial IQ
How long would your boss keep you around if you ignored work tasks you really didn’t want to do? Not long! Some money tasks aren’t the most exciting use of your time, but the attention you give them will go a long way toward developing and maintaining a solid financial plan.
9. Manage your debt
Let’s face it: mostly everyone has debt. But is it a good debt (for example a house) or bad debt? A bad debt can be costly in interest rates. You’ll need to put a strategy to pay your debt in place so that you can pay down any high interest debt that is slowing you down reaching your financial goals.
10. Know when to treat yourself
Sometimes saving money is hard. But you don’t have to always feel like you’re counting pennies! It’s important to know when to give yourself a break from saving and reward yourself. Treating yourself to an occasional reward will make it much easier to stick to your plan. Include the “rewards” column into your monthly budget that you stay on track while not depriving yourself.
11. Different accounts for different goals
Too many people live paycheck to paycheck! As soon as it comes in it seems all the money goes on bills and debt. Between recurring mortgage/rent, loans, insurance etc., and everyday expenses like groceries, gas, entertainment, etc., it can be hard to keep track of everything.
An easy way to simplify your cash flow is to open accounts for specific uses. For instance, you could have one checking account for all bills and a second account for everyday expenses.
You can do the same for savings: Open one account for new car savings and another one for that trip you want to take around the world. You’ll clearly see how much you’re saving for each objective and how much further you have to go. Many banks also offer financial tools, like a savings tracker and budget tracker, dedicated to helping you save for your objectives.
12. Stay up-to-date on financial news
Stay informed on the latest news and developments concerning market trends, the policy interest rate, regulation changes, etc. Read personal finance books, listen to financial podcasts during your morning commute, sign up for financial newsletters. There’s also a lot of great websites and social media accounts dedicated to all kinds of financial topics. This exposure will help boost your financial IQ.
13. Listen to different points of view
Go further than just listening to advice that confirms what you already believe about money management. Search for alternative viewpoints to broaden your perspective. Who knows, maybe something you hear will resonate.
14. Revisit your plan regularly
Even the best financial plans need to be revisited every so often. Life happens, and your financial situation may change with planned and unplanned events. Make it a habit to review your progress every 6-12 months. For example, do you have enough cushion to save more for a certain goal? Are you spending too much in a certain area? Take a hard look at how your plan is performing so you can make any necessary adjustments.
15. Don’t make money talk taboo
Now, we’re not suggesting you make your salary public knowledge. But don’t shy away from learning about money among your friends and family. Maybe your best friend has a great saving tip to share. Perhaps your sister highly recommends her financial advisor. Sure, certain money matters can be sensitive, so use your discretion. But don’t be afraid to learn something new or share your own tips.
16. Put your money to work
Is your money working hard enough for you? Keeping all of your savings in a standard savings account could have you missing out on higher returns. For example, you could keep your emergency fund in a standard savings account, put your short-term savings in a certificate of deposit or money market account, and invest your long-term savings in stocks or other securities.
17. Do a digital cleanup
Are you still being charged for a membership you don’t use? Did you forget to cancel a free trial offer and ended up auto-enrolled in a monthly or annual subscription? Go through your account statements to catch and cancel any of these recurring expenses you no longer need.
18. Use joint accounts appropriately
Just because you’re married doesn’t mean all your money should go into your joint checking account. Joint accounts are great for covering mutual expenses, like groceries and bills. Then, each of you can have money in your own accounts to spend (or save up) however you’d like. That can eliminate a lot of tension if one spouse is a saver and the other a spender.
19. Invest in your health
When money is tight, it’s hard to justify increasing your budget in any area. But those that impact your health are probably worth it, such as buying healthier groceries or signing up for a gym membership. It might seem expensive now, but these purchases could lower your risk for developing chronic health issues that’ll carry much larger costs later in life.
20. Maximize tax breaks
Are you taking full advantage of the tax breaks at your disposal? Contributing money to your RRSP or TFSA helps you plan for the future with tax-free dollars. The same goes for a Health Savings Account or other reimbursement accounts that help pay for health expenses.
Be ready for your goals
Ready to start organizing your financial life? Whether you want a checking account, a savings account, or both, knowing the added benefits your bank offers could prove beneficial. Whether it’s saving for a future goal, receiving notifications to balance your budget, or automating payments to simplify your bills, there’s an account out there that is just right for you.