Examples of Financial Intelligence

In my previous post, I mentioned financial intelligence and buying things that matter over things that don’t.

One thing that annoys me with internet advice is people never extrapolate on their ideas. It’s really easy to say “Oh do this and X with happen to you! Sign up for my blog newsletter!! I need the traffic!!”

I’m going to do my best to explain everything I advise.

First off, what is financial intelligence?

It’s the knowledge of money. How to use it and how it works.

Most people in the world do not show and understanding of money. It’s evident in the fact that a majority of people live paycheck to paycheck. For clarification, living paycheck to paycheck, or PtoP, is using the money you make at your job as soon as it comes in and then just before the next check comes in, you barely have enough money to do anything until the next check comes in.


A very basic example:

First paycheck of the month +$1000 Yeahhhhh!!! Let’s go to dinner and see a movie! -$100

Day 2

I’m hungry, I’ll go to the store and get groceries. *Buys on an empty stomach, ends up paying way too much on groceries that won’t last long* -$200

Day 3

My friends just showed up to work with these really great shoes! They look so cool! I want them! -$200

Day 4

Some bills came in. I have to pay for them. Cell phone -$100 Car Payment -$400

Day 5

I can’t do anything! I spent all my money and my bank account is about to be overdrawn and my car just broke down!

This is may not seem like it, but people really do live like this. This is a pretty extreme example but this kind of thing really happens.


Back to financial intelligence, that same scenario could be very different with some different mindsets. For example, the day the paycheck comes in, a portion of that should be set aside for savings and investments. You don’t want to work until you’re 80 and if an emergency happens, you want to be ready financially.

First paycheck of the month +$1000 Yeahhhhh!!! Let’s go to dinner and see a movie! -$100

Depending on your specific situation, dinner and a movie might not be so detrimental to your budget. In fact, having fun is good for your well being. Just don’t go nuts with movie theater popcorn. (that stuff is one of the most marked up foods in existence. If you need a snack, just smuggle food into the theater.)

I’m hungry, I’ll go to the store and get groceries. *Buys on an empty stomach, ends up paying way too much on groceries that won’t last long* -$200

Getting groceries is a fact of our civilized lives. We all need to get food to survive. There is a plethora of information on frugal grocery shopping so I won’t go into detail here but some good tips, bulk sections are your best friend, learn to use spices and avoid processed foods. Many times they are overpriced and definitely not good for you.

My friends just showed up to work with these really great shoes! They look so cool! I want them! -$200

Keeping up with the Jones’s is financial suicide. In my example, it’s going to work and seeing someone with something they bought and then yourself wanting it after seeing someone else have it. Or worse, buying something more expensive to show them up.

Having nice things is nice, but what good is a $200 pair of shoes going to do for you if you get sick and miss a week of work and don’t have sick pay? Most people will be shocked that I say this but Goodwill is a fantastic place to get shoes. You need something to cover your feet, go there. Or if you’re like me and want some nice new shoes that don’t require a payday loan, Payless Shoes is a store that my family have been going to for years.

But that’s just shoes. There are many other things in life where you have a choice to get the cheap option or the expensive options. It comes down to what it is, and your financial state. Can you afford 5 of the expensive option? Get that. If not, get the cheap one.

Some bills came in. I have to pay for them. Cell phone -$100 Car Payment -$400

Bills are an unfortunate part of life. But it allows us to have luxuries that the rest of the world doesn’t have. I hate paying my cell phone bill but having a computer in my pocket with service on it has come in handy more then I can count. Same with car payments. I personally don’t have a new car with payments but for some people who don’t have the capabilities to work on their own car, a new car may be their best fit. I know someone who has 2 car payments for 2 new cars. She is a mom and she has a job that is very far away and her boyfriend has a job that is also far away. Both of them are not mechanically savvy. I think they don’t even have a screwdriver in their house…

The point is, some bills can be justified. Others cannot. I love Netflix, but I can’t see myself paying for it every month. It’s a time waster and it’s a small cost that adds up with other small costs to make a big cost. I know some people that have multiple streaming services they pay for. Each of them on their own aren’t much, but when combined, it’s a big cost. And for what? Entertainment and time wasters. Is it a bad cost? It depends on your situation.

I can’t do anything! I spent all my money and my bank account is about to be overdrawn and my car just broke down!

This is the prime example of why living paycheck to paycheck is such a bad idea. All the money from the paycheck has been spent and an unexpected large cost has just emerged. This is a risky way to live. Smart money decisions can avoid this. Automatically putting money into a savings account before you can get to your paycheck is great way to save money. In the book Richest Man in Babylon, this is one of the money lessons. If the money is saved, you learn to live without it. If you live on $1000 a month, you save $100 before you get to your check, you learn to live on $900 a month since that’s your “final” paycheck. This is one of the basic lessons on financial intelligence.

But I make 6 figures a year! Where is my money?

Knowing where your money is going is another quality of financial intelligence. If you make a lot of money but still struggle, you don’t know where your money is going. This goes back to the section on bills. For  most people, on their budgets, income can’t go up unless they get a raise or promotion. But expenses can be reduced or eliminated.

Take the time to list all expenses. I like to look at my bank statement. It lists all money movement. Incoming and outgoing.

List all the outgoing. Whether it be bills, donations, fun money whatever. List it and look it. What expenses can be reduced? What can be eliminated?

A good example for some people that have bundled TV, phone and internet plans. I’ve met a rare few that don’t have cell phones but I have yet to meet the unicorn that has a landline phone and actually uses it. These bundled plans have really enticing promotional offers of $XX a month for the first year. After the first year guess what? It usually doubles the payment.

This is what I personally do. I have only internet. Most people do but I’ll explain anyways. No one in their right mind will use a landline if they have a cell phone. TV is full of commercials and cookie cutter shows that not only have nothing to offer, but are all the same. Watch Duck Dynasty and Pawn Stars and tell what is different about them. The internet has so much free media on it that if you wanted to watch the newest episode of Pawn Stars, you can find it online. Some people even put it up on Youtube.

Cancel the TV and home phone portion of the bundle. Your bill will drop. This  is just a basic example of cutting your bills cost. Some other tactics to use is the play dumb and nice when your bill goes up on something and convince the representative of the bill to lower it for you. The keyword is nice here. Don’t go yelling your head off about your bill going up $1.

Spend less then you earn.

I already stated earlier that not everyone can own a 20+ year old car and have the skill set to keep it running. Some things you will need to buy brand new such as a car. Or if you can, don’t buy a car, get a bicycle!

If you need to take a loan on a new car for example, don’t let the payment be more then you can handle. Most lenders won’t even give you a loan if your finances are no good but some will do whatever it takes regards of your financial state. If you must go down this road, make sure you can afford the payment.

If you rent an apartment for $1000 a month and you make $1500 a month. Would it be wise to have a $400 car payment? From this point of view, yeah you would still have $100 left over and still make rent!

Take a step back and reanalyze this scenario. An apartment is not just rent. Most places will have you pay for some bills. Others have to pay all the bills. If you can pay all your bills with $100, please send me an email and tell me what you do. If not, this is not a good idea. The best bet in regards to a new car payment would be get a more sensible car. A car that is a base model with low miles pre owned. Your payment will be much less.

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