What is the financial IQ and how to increase it

The economy is present in each and every one of the facets of our life: in the supermarket, in the home, in the school of our children, when we take out an insurance … For this reason, it is fundamental to have a broad financial knowledge base and solid possible. Who has not repented on any occasion of having made a wrong financial decision? A loan with a very high interest rate maybe? A mortgage with a floor clause? So that this does not happen again, we teach you how to increase your financial IQ.

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What is the financial IQ and how can you increase it?

  1. Learn to differentiate what is an asset from what is a liability . Robert Kiyosaki, in his book “Rich father poor father” pointed out that an asset is everything that makes money in your pocket, and a liability that makes it come out. With assets we are richer, while liabilities make us poorer. All your economic decisions should be based on accumulating assets and eliminating liabilities.
  2. Study the operation of compound interest , the most powerful force in the universe according to Albert Einstein. This can work both in your favor -every time you make an investment and get a return for it-, as well as against you -when you borrow and pay interest for it-. Understanding its operation is essential to make good economic decisions.
  3. Think in intertemporal terms . You do not value everything in the short term, as most people do. Your economic decisions should also consider the medium and long term. You reason about what your future expectations are and make financial decisions based on it. Keep in mind that sooner or later the day of your retirement will arrive and you will need to have money saved.
  4. Sign up for courses to learn finance . There are finance classes for beginners, young entrepreneurs or people who want to achieve financial freedom, for example. These courses can be very interesting because they will allow you to broaden your understanding beyond what you already know.
  5. Read books on economics . There are many in the market, we recommend some at another time. You can start with “Rich father poor father” or “Have a worse car than your neighbor”. They will not disappoint you, we assure you.
  6. Find a mentor with financial knowledge . If you surround yourself with people with financial knowledge and, in particular, you are looking for someone to be your mentor, your financial IQ will increase exponentially in a very short time. No one better than a family member or a friend to get started in the world of finance.
  7. Plan and control your personal finances . You have to be able to convert your personal finances into a company and take each and every one of your decisions as if you were an entrepreneur. For this you have to plan and control every euro that enters your house so that it does not become a lost euro.