It’s Easier Than You Think to Get Good at Money Management

A curious aspect of our educational system is that it doesn’t teach money management methods despite the fact that handling money well is an essential life skill. While people eventually learn through experience how to earn and spend money, they rarely learn important financial principles or establish healthy financial habits. Still, even if you did not learn financial skills in school, it’s never too late to learn how to handle money.

In his book, Happy Money, Ken Honda, a financial consultant, suggests that we can improve our cash flow by increasing our money IQ and money EQ. When we have raised both our intellectual and emotional intelligence about money, we will always have more money coming in than going out.

Improve Your Money IQ

Money IQ is improving your intelligence around money; a concept that’s often referred to as  “increasing your financial literacy.”

As an example, learning about life insurance will teach you about how to protect yourself and your family from the cost of unexpected life events. Besides appreciating the value of life insurance, you also have to understand different types of life insurance available, such as term vs whole life insurance. When you learn the difference, you’ll be able to make better decisions. If you only want coverage for a specific period, then choose term life insurance, but if you want lifelong coverage and to invest in a policy’s cash value, then opt for whole life insurance.

The purpose of improving your money IQ is to understand what financial instruments you can use to improve your finances.

Improve Your Money EQ

Still, managing money is not all about making logical choices. Since money is intrinsic to our well-being, we often find it difficult to separate emotions from money.

Our emotions about money can cause many psychological challenges for us. Instead of treating money as a means of exchange, we accumulate a lot of emotional baggage around it.

Here, for example, are three common ways that a low emotional quotient around money could hurt a person’s chances of dealing sensibly with money.

  1. Feelings of inferiority. Some people feel inferior to others because they have less money. Ken Honda reveals how surprised he was to discover that some millionaires he interviewed did not feel wealthy because they could not afford to buy as expensive an airplane as their millionaire friends.
  2. Feelings of superiority. Some people feel superior to others because they have more money. Often this occurs when somebody has a financial windfall. Someone who previously had a crushing sense of inferiority about not having enough money now develops a sense of pride and arrogance.
  3. Feelings of insecurity. Some people feel so insecure when they don’t have money that they become suicidal if they lose it. Jesse Livermore was one of the greatest stock traders of all time because he earned a net worth of $100 million in 1929,  the equivalent of $1.5 billion in our time. He developed his own ingenious system for trading when stock traders had few resources to analyze market trends. In fact, in the 1920s, they didn’t even have printed charts with price patterns. Unfortunately, he did not know how to emotionally manage his wealth, lost it all in five years, and committed suicide.

Since we charge money with so much emotional baggage, it’s essential for you to notice any belief systems you have about money that could be sabotaging your ability to earn more or to keep what you earn. Remember, money is only a means of exchange; it is not a symbol of your value as a human being. 

In conclusion, by improving your money IQ as well as your money EQ, you will become wise about how you manage your money.

 

Speak Your Mind

*