Financial Intelligence

We often learn to be intelligent on two planes or dimensions: rational and emotional. The first focuses on being quick to develop abstract thinking and reasoning, to understand complex ideas, and to solve problems that require analytical and rational thinking; The second endeavors to be able to recognize and master not only our emotions and feelings but those of those around us. However, we were not taught to be smart in economic or financial matters.

On the one hand, economic intelligence refers to the ability that enables us to learn how to generate resources in order to achieve the desired standard of living; In other words, it means taking advantage of our personal abilities to make money and gain. On the other hand, financial intelligence is our ability to develop financial habits that enable us to efficiently manage our money, sometimes through investment, savings, and sometimes through adequate financing. If you want a high Financial IQ, review these five questions:

How am I organizing my money?

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What starts well, ends well. It is very important to be aware of the total amount we earn weekly, biweekly or monthly. Although it is hard to believe, most people cannot say exactly how much they earn and therefore do not know exactly what their expenses are. We must establish a method for organizing our earnings so that we can distribute them among our assumed obligations, which may include both spending and saving and investment. There is a wide range of options, from the traditional savings account to technology applications. How am I making my commitments? We often honor our commitments without being clear where we are getting the money from. One should not undress one saint to put on another, that is, we must know if we are emptying one budget to cover another or if we are in debt to pay it. It is extremely important that we set spending goals and priorities as well as set a budget for each one, preventing them from becoming a nightmare.

Got a surplus for savings or investment?

If making our commitments is critical, to be a financial genius we must use part of our money for investment and savings. However small, it will be important and representative in the future. Saving will allow us to build a capital that can be used to achieve some objective already proposed, such as travel, buying a house, car, studying, etc .; while investing will be a great tool for multiplying our money: stocks, properties, currencies, etc.

Is credit required?

Credits are not dangerous, but not knowing how to manage it is risky. Financial intelligence will allow us access to credits that do not exceed our debt capacity. Going into debt is not harmful as long as we have the resources to take on debt without affecting our quality of life.

What to do with the new cash inflows?

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We have already received the return for our investment, or when we have saved a certain amount, the following step should be taken. Anyone with little financial intelligence is sure to use this money for consumption: new clothes, moving cars, home repairs, home remodeling, vacations, etc; A financially smart person would have to reinvest this capital to multiply their money. New money inflows should not disappear from our hands but help us achieve our financial freedom through the multiplier effect of reinvestment.

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