Increase your Financial IQ 

The question arises “How to increase it? The answers as shared by the author are below

1.       Increase your Income

Generally live below your means is sound advice for most people. However expanding the means or income is the core of financial intelligence. Next time when you think “I cannot afford it” reframe to “How I can afford it? Where there is a will there is a way.

2.       Protect your assets

One of the ways is to understand the law in letter, spirit and implication. There are many ways to do it, however a suitable strategy depends on your Individual circumstances. In India one of the ways assets can be protected is through Trusts or Policies taken under Married women property act. Under this act at the time of taking the policy if you have taken it under MWPA then your creditors cannot touch it. The only exception is for tax authorities who can seize the assets if taxes are not paid.

3.       Budgeting

Most people pay themselves last. First rule to be financially independent is to pay oneself first. Most people order of priorities:

Pay the bills

Pay the loans

Save whatever is left

A financially healthy person’s pattern:

Pay yourself first

Pay the bills/loans through what is left after paying oneself. One of the ways to pay yourself first is to automate your investments through sips/or other opportunities. One of our clients automates a debt fund sip to prepare for Diwali celebrations.

4. Leveraging your Money

It is only to be deployed for assets under your control. Where demand conditions are relatively good and likely to be stable, In those situations Leverage adds value. One of the tested practices is to “Factor in the worst case scenario at the time of leveraging” and prepare for the situation accordingly.

5. Increase your financial information quality

In the information age which we live improving financial information is critical. It helps to take more informed decisions. One of the ways to have better information is to read a lot on issues pertaining to the financial decision at hand. It helps to put things in perspective. One of the other ways is to engage with professionals who are transparent and go the extra mile to help you understand what you are getting into.