7 habits to boost your financial IQ
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If your goal is a prosperous year, there is more than one way to get there. You could boost your 401(k) or invest in a individual retirement account. You can pay off high interest debt, build your emergency fund and save for a specific goal. There are even a few things you can check off your financial checklist in five minutes or less.
Still, changing your mindset is also important if you want to build wealth. If you never learn more about money, how can you make long-lasting changes or avoid past mistakes? If you're looking to boost your financial intelligence, here are seven habits to pick up in the new year.
Many people looking to learn personal finance start their journey with a tried and true money book. Popular go-tos include Robert Kiyosaki’s “Rich Dad, Poor Dad,” David Bach’s “The Automatic Millionaire” and “The Total Money Makeover” by Dave Ramsey, but there are plenty of books that can help you think about money in a new way. Pick up one (or two) in financial subjects that align with your goals, whether that’s budgeting, debt repayment or investing. (Psst: You can also check out our Moneygenius Magazine for year-round personal finance tips and tricks.)
If you focus only on how much you earn, it’s easy to think you’re getting richer when you’re really not. Bringing in more money than you did last year — even at six figures — won’t help you grow wealth if you spend it all. But tracking your net worth – a term used to describe your assets minus your liabilities - puts your income in perspective. It helps you see how your liabilities change over time and how much money you’re actually banking. You can track your net worth manually, but there are also investment apps that can do it for you.
Ready to have a real financial awakening? Track your spending for a while. This habit takes a little leg work, but it shows you where your money's going. Whether you choose to write down your purchases, use bank and credit card statements or special software, you’ll have nowhere to hide once you see how much you actually spend on food, entertainment, and extras every month. (And, if you don't know how to start cataloging, here's a simple budgeting spreadheet that can help.)
As your financial situation gets more complex, meeting with a fee-only financial planner who specializes in maxmizing investments may make you privy to some tip or strategy you're unfamiliar with. On the flip side, meeting with an accountant or tax planner also has advantages – especially with all the upcoming tax changes in 2018. Ideally, you’ll want to pay the smallest tax bill ... without breaking the law. A tax planner can help you do just that, while also helping you minimize taxes in the future.
Maybe you want to invest in a new course to learn new skills, or perhaps you want a certification that could lead to higher pay and better job prospects. Sometimes, the best money investment anyone can make isn't bonds or stocks — it's personal development. After all, what better tool do you have to grow wealth than you?
By reaching out and connecting with people in your niche, you keep your finger on the pulse of your industry and make valuable contacts. You never know when a new relationship can lead to an exciting new job prospect, partnership or career opportunity.
Sometimes, life seems unmanageable and unpredictable. Even if you learn all you can about money, you can’t control what happens in the stock market or if the value of your home goes down. With so much completely out of our hands, many people wonder if there’s a point in trying to achieve financial health. But don't despair: Focusing on what you can control absolutely leaves you better off. For instance, while you can't change the ebb and flow of the stock market, you can control how much you invest. And, if you can’t control whether you get a raise at work, you can control how you spend your paycheck.
Working hard on a money makeover? Here's eight pieces of timeless financial advice to consider.
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