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Basics of Personal Finance IQ

Basics of Personal Finance IQ

Just the phrase “Financial IQ” scare some people into fits of rage throughout the day, and cold sweats at the evening. Although it may seem much easier to face the monster under your mattress, your financial IQ will not be as terrifying as you might anticipate.

Financial IQ basically refers to your knowledge of how your personal finance works. Let’s take a look at the basics of monetary skills and the way to overcome the fear of Financial IQ.

Financial IQ Basics

Financial IQ is no more than the awareness about the flow of money; how it can be earned, how it is spent, and the way it can be invested. Various humans will present you with different answers when you ask them about financial IQ. Many individuals aren’t exactly sure what makes up financial IQ, so we just ramble around till we stumble on some thing semi-intelligent.

In essence, financial IQ means realizing how you make money, the way you deal with money, the way you come up with a spending budget, and utilize any excess eventually.|In the uncomplicated shape, financial IQ is nothing more than the fundamentals of earning the dollars, protecting that which you have made, budgeting, and leveraging the surplus at the end. It’s also about studying your money flow. That is it! With this understanding, I’m certain that you feel confident now and your dread is beginning to go away. What you should see now is how financial IQ revolves around earning, budgeting, and investing properly.

Staring Down Fear

To quote Dale Carnegie; “Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.”

That is sage advice from one of the most financially intelligent people in history. What Carnegie is stating is you may defeat your dread of mastering finances by going out and doing something about it, in spite of the anxiety you feel.

Scientific studies have shown the human mind retains the most information in one of three approaches; sight, sound, and action. Some of us learn best by reading, others by listening and discussing, and the rest of us learn by getting away from our keister and jumping in to figure it out as we go.

There are many areas to get serious with to better your comprehension of financial IQ; read the business section of the daily news, read the stock reports, listen to financial podcasts and news reports, or start doing a little investing to find out what transpires as soon as you get your feet wet.

The Next Steps

Get engaged. Ask yourself one question – is doing what you are doing educating you anything more about financial IQ? In case it is, then preserve up the study, but in case your answer is no, you might want to reconsider your plan of action.

Look for a friend, or maybe a coach with whom you can speak about your finances. It’s okay to ask questions because it is better to get the facts straight than hide under your bed and proceed to live in the darkness of financial ignorance.

Dale Carnegie was absolutely right. If you really want to overcome your fear of finances, do not sit at home. Get out into the world where finances don’t take a break. Immerse yourself in the world of finances and overcome your fear; it may just end up being your favorite hobby. And it won’t hurt your pocketbook either.

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Make A Left Turn on Personal Finance To Long Term Wealth

Make A Left Turn on Personal Finance To Long Term Wealth

The ability to manage your personal finance is key for successful long term financial health and stability. Regardless of how much you earn, being able to make your income work for you is essential. Not everyone requires a large salary and an expensive home and car to be happy, but they do need to be comfortable in terms of being able to eat and sleep in a healthy environment, and provide adequate clothing and shelter for their families as well. This can only be achieved through sensible personal financial management, that is, only spending what you can afford, not borrowing money over and above what you can realistically afford to pay back, and ensuring you and your family will be comfortable and able to maintain the standard of living when you retire.

Banks are often very willing to give credit to customers, which is where you need to be careful – they are not so easy going when it comes to paying the money back.

Overdraft interest can be very expensive, and you end up paying back much more than you originally borrowed. On top of that, they charge high prices for going over the agreed amount, whether by accident or not, so customers need to be extra vigilant when approaching their limit. On the other hand, when the need is only short term, an overdraft is a very viable option. If you know in advance one month you will be caught short, then having an overdraft facility can be a big help. Similarly, simply setting up and overdraft but not using it until/unless there is an emergency will give you piece of mind that you will not struggle to suddenly raise any money unexpectedly.

Credit cards can be very useful, especially when using them as opposed to debit cards purely to take advantage of any spending bonus points/offers gained by regular use – which will only happen if the balance is paid off fully at the end of every month. Having a credit card for emergencies is again a sensible idea, especially for larger, unexpected bills such as car repairs. Many credit cards offer a 0% interest on the balance for a set period, often 6 months, and this can be manipulated so that you change company every six months to avoid paying any interest. Of course, this just keeps the interest rate down; it does nothing to shave the amount of what you owe. It is a common mistake to see credit as an extension of your wages – nothing could be further from the truth, it is not your money. You will have to pay it back at some point, and the sooner the better. Therefore, the best advice is again to only borrow what you can afford to pay back.

Finally, to secure your future when you eventually settle down and retire, it is an extremely advisable idea to set up some form of pension scheme, whether that is with your bank, or your employers. Pension schemes can move from company to company in the event of job changing, and your employers simply take a percentage of your wage each month and put it aside, to be given to you in a lump sum as and when you are retired, so you can maintain a good living standard when you are no longer working.

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Future Wealth Through Managing Personal Finance

Future Wealth Through Managing Personal Finance

Individuals and family units make everyday decisions on how they handle money. What amount is spent, how much is saved and investment strategies are all part of creating wealth and managing personal finance. Planning for the future is a necessity rather than a luxury.

To be able to save with the idea of investing, it is necessary to know ones income and liabilities. In other words, knowing the income and exactly how the money is being spent is essential to putting to place a budget and savings plan. The budget does not have to be detailed but with sufficient information to be able to assess the spending habits. An Excel Spreadsheet with three columns headed income, expenditure and balance funds will suffice.

When the budget shows that the balance remaining is in the negative or a very mall amount, a review of the spending pattern can be undertaken. If it is obvious that it is not possible to cut down on the normal outgoings to increase the savings column, thought should be given to getting another income. A part time or casual job can help with getting the extra funds towards savings.

The next step is to set a savings goal and create a plan of action to achieve that goal. The goal should be realistic and achievable. If a pie in the sky goal is set, it can be very demoralizing when it becomes obvious that the goal is not attainable. Of course the goal can be changed up or down as time goes on, depending on how well the plan is progressing. Writing down the goal and the action plan will help to monitor the progress.

Savings accumulated by hard work should be made to grow by responsible investing. Initially the easy methods would be an interest bearing savings account or fixed deposit account or a managed fund. The type of investment chosen will depend on the money available to deposit and the requirements of the family.

More sophisticated ways are the purchase of stocks and shares or other appreciating assets such as gold or art works. These forms of increasing savings should not be undertaken without the necessary knowledge. It is not possible to be masters of everything. Therefore, if you are adventurous and wish to try the more advanced investment strategies, then make sure that you first invest in learning and training.

One of the major investment strategies is of course purchasing property. This is a long term wealth creation strategy and should be included in any investment portfolio. The main advantage of investing in property is the fact that it improves cash flow by giving rental returns and also has tax advantages with negative gearing.

Whatever investment plan is put into place, it requires discipline and perseverance to achieve a level of success. In any event future wealth through managing personal finance can become a reality if the correct savings and investment plans are formulated. Since it is an acknowledged fact that people cannot live comfortably on a pension alone, wealth creation is something everyone should give some thought to.

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