Below is an action plan to help you increase your financial IQ
The reality is that you can make any amount you want to make. But there are few things more risky than an investor who has no idea what he is doing. So, where do you begin?
- Learn the language. Understanding the definitions of financial words will greatly increase your financial vocabulary and knowledge of the subject. Start with simple terms like options, assets, liabilities, ROI, and gross vs. net income. Then, dig deeper. Every time a new word comes up in conversation or in your readings, stop and look up the definition instead of glossing over it.
- Figure out the numbers. Learn how to read financial statements and report, such as income statements and balance sheets. If you intend to make money and be financially free, then you’ve got to become very comfortable with basic addition, subtraction, multiplication and division. Consider every investment you are pursuing as a mystery to be solved and numbers are the clues that guide you.
- Read and listen. There are countless books, blogs and podcasts on the subject of investing, online and offline businesses, many geared toward beginners.
- Find a mentor. Seek out a seasoned real estate investor and pick their brain. Behind every successful investor is a person who likely made some costly mistakes early on—see if you can find out more about where they went wrong and not just their successes.
- Attend workshops. Free seminars and workshops can kick-start your path to educated investing and taking control of your financial future.
- Be More Resourceful: Make good use of your time and resources, and use what you have to get what you want. What you need to start is what you have.
- Question everything. It’s one thing to seek advice from a trusted source, like a business partner or financial adviser, but it’s another thing entirely to take everything you hear as gospel. You must think for yourself, so that you’re making the most informed decisions possible. Try asking these questions when presented with advice or opportunities: Does this make sense for me? What are the pros and cons? Will this get me closer to my financial goal?
- Ongoing education. Learning is a lifelong pursuit because things change. Laws, regulations, and terminology adapt over the years, so keeping current is an investment in your future. Investors who allow themselves to become stale will no doubt face numerous risks: losing momentum, legal ramifications, etc.
- Gain Experience. At some point, you have to decide you’ve learned enough to pull the trigger and make your first investment. Hopefully you will have gained enough knowledge to avoid some of the most common pitfalls. But you’ll likely make some mistakes and experience a few setbacks along the way. What’s important is that you learn from those situations and apply that to your next investment. You’ll get wiser with each go-round. I sure did.
I don’t know a single investor who didn’t have some (or a lot) of fear in the early stages of their investing life. Even today, every great investor sometimes get nervous venturing into new areas of investing. It’s natural. But if you let that fear paralyze you and keep you from moving forward, you’ll miss out on reaping the rewards of your newfound education: to financial freedom.