Basic Math and Accounting
Of course, basic math or accounting skills will greatly help you manage your finances. While a lot of people don’t know how to balance a checkbook these days, it’s still an important skill to learn. Basic accounting skills allow you to draw up budgets and set up net worth tables, which you will need to get an accurate picture of your cash flow and wealth. You probably should also learn to do complex math in your head. a At a bare minimum, you will want to learn to calculate compound interest and estimate expected monthly payments on a loan given the principle and interest rate. This is especially important when deciding between two loan options.
If you want to keep track of how much money you spend or what you’re spending money on, it’s important to stay organized. Keep all your receipts, bills, and financial statements in file folders so that you have easy access to them if a problem or question arises. You should be keeping all of these items anyway, but keeping them in an organized file cabinet or file folder will help you out in the long run. This is also important because your major financial expense is likely to be income taxes. You’ll want to have good records so you can minimize your taxable income and therefore the amount you need to pay in taxes.
Ability To Prioritize
If you have a lot of bills to pay or financial issues to take care of within any given month, the ability to prioritize is an important skill to have. For instance, if you’re having trouble coming up with enough money to cover all your bills one month, you need to prioritize how you spend your money and which issue is the most important (such as paying the heating bill instead of the cable TV bill). Hint: pay your rent or mortgage first.
In addition, a large part of successful personal finance is goal setting. You probably have limited resources and will need to decide how to allocate your resources. In this case, think focus. Maintaining a tight focus on achieving one single goal greatly increases the chances that you will get there.
Decision making skills are also very important when it comes to improving your finances. You may need to decide how to eliminate excess spending or how to prioritize your spending habits. Your financial decisions can be stressful, so it’s important to be able to make good decisions about your money. One way to do is is to make a list of all the advantages and a list of all the advantages of a particular course of action. If there are more advantages than disadvantages then your decision is clear. Don’t make any major decisions if you are tired, in an emotionally agitated state or under the influence of drugs or alcohol.
Have you ever tried to read the fine print on a credit card statement or a loan statement? Maybe you’re singing a lease for a new home or apartment and are struggling to understand the legal language on each page. Maybe you don’t know whether a 23% interest rate over a five year period is better than a 15% interest rate over a two year period. Having strong analytical skills will help you determine whether certain financial deal or situations are beneficial or not.
Problem Solving and Interpersonal
Problem solving is also another key skill that will help improve your finances. You might need to take action if you suddenly notice a charge on your credit card statement that you don’t remember making. Or you may need to solve the problem of how to reduce your debt or how to finance a house or car. Having strong problem solving skills will help you out if you ever find yourself in a tricky financial situation. Problem solving is key because a lot, if not most, financial decisions involve more than one person and often involve important deeply values such as safety or security.
Research skills are incredibly important because you always want to research various loans, credit cards, banks, or products before deciding on anything. What happens if you decide to go with one credit card only to find out that you could have been approved for a different one with a lower interest rate? Having strong research skills will help you determine what financial choices and solutions are best for your situation.
Good communication skills will help you discuss the terms, conditions, and any problems that arise with any of your financial accounts. While strong communication skills may not be the most important skill to have when it comes to improving your finances, they’re still an important skill to have regardless. For example you may need to call to reduce your credit card rate and having good communication skills can help you have a pleasant interaction with the customer service staff you deal with.
Are you an impulse spender? Do you have trouble saving money? Do you have a habit of buying items you already have? Not having self-discipline can be detrimental to your finances. A lot of people blame their financial problems on their lack of self-discipline. Having self-discipline can stop you from making unneeded purchases or straying from your financial goals or plans.
In this day and age most people use technology to maintain their finances. Whether it’s paying bills online or signing up for loans or credit cards through an online server, you need to be savvy about how to use technology. This is especially important because a lot of new exciting applications are being developed exclusively for smartphones and internet in silicon valley. Notable examples of this trend are companies like Loyal3 and Robinhood. Both of which are leveraging technology to offer stock trades at zero cost. Being technologically savvy will definitely help improve your finances and give you access to services that brick and mortar shops can’t offer.
For more on this, please check out our articles on five money management skills that can help you save money and key skills needed for personal finance.