By: Anne Brennan Malec, PsyD, LMFT

Many of us may be familiar with the term emotional intelligence, but fewer may be so with the idea of financial intelligence. Financial intelligence is the practice of managing finances and spending in a way that is in keeping with a budget and one’s financial goals. Financial intelligence is also the ability to recognize financial behaviors and decisions, both positive and negative, and understand the impact or consequences of them. That is, before purchases are made, the financially intelligent individual runs through a series of questions that determines if: the expense is a want or a need; is it in the budget; will I regret this purchase tomorrow; is there a less expensive alternative; am I rationalizing the “need” of this item; is there an emotional need this purchase is designed to meet? The financially intelligent person is able to weigh the pros and cons of a purchase, examine the emotional influences on a purchase, and determine if it is truly “worth” it.

Financial intelligence can be thought of being comprised of multiple abilities in one’s financial decision-making process and management of money. Financial intelligence includes the abilities to recognize, understand, change, and manage one’s financial behaviors and decisions. To begin, one needs to be able to recognize his or her financial decisions and behaviors. Such as overspending when paid and living on pennies right before the next paycheck, which can become a vicious cycle resulting in unrelenting anxiety and stress. The development of financial intelligence requires one’s willingness to analyze and understand the reasons for dysfunctional money behaviors, such as shopping sprees to fight off feeling down, or agreeing to spend beyond your budget because you do not want to appear “cheap” to friends or family. We know of many financially struggling individuals who overspend from FOMO, or fear of missing out or wanting to keep up appearances.

Personal introspection and self-awareness related to spending can be uncomfortable, but are necessary steps in gaining control over your spending decisions and relationship with money. Having to say “no” to oneself is not pleasant, as it can lead to feeling deprived, which can then lead to acting out through overspending. The trick, or challenge here, is to reframe the saying of “no” to oneself as a mature decision and as an act of self-care. It’s determining if your desire to spend is a need or a want, and if going ahead with the purchase will lead to being over budget, which then may put you behind in building your emergency fund, only continuing the cycle of negative thoughts and financial decisions.
Once you are able to determine your wants and needs and understand where you are financially, both mentally and monetarily, tips and tools to manage your finances are the key to keeping you on track. This could be something as easy as creating a detailed budget for monthly finances or setting up separate accounts for certain types of purchases. The final step in developing financial intelligence is management, in which one consistently makes positive financial decisions to keep in line with his or her financial budget or goals and is able to recognize and implement changes when something goes wrong or changes occur. The financially intelligent individual is constantly going through a process of identifying, evaluating, and changing to ensure positive financial decisions.

Financial intelligence can also play a significant role in our relationships with partners, friends, colleagues, and children. When one considers entering into a relationship, going out with friends, accepting a job, or teaching children about allowances, for example, financial intelligence has a significant role in those decisions. Take for instance an invitation to go out for dinner with a group. One might think that is an easy decision, either you want to go or not. But for a financially intelligent person, there is also the consideration of factors such as: how much will it cost; is the restaurant too expensive for me; will we split the bill fairly; will I have to pay to get there too; can I really afford it? Financial intelligence also plays a significant role in relationships. In choosing a partner, someone with financial intelligence will consider: do we have the same beliefs and attitudes about money; do we spend and save similarly; do we share the same financial goals; how will we make financial decisions together; will money and financial decisions become an issue in this relationship? It has been shown that financial compatibility and responsibility are significant traits in how we select partners and even how attractive we view them. Did you ever think your credit score or credit card debt would be an aspect of how prospective partners consider you for compatibility?

Although it may not be a commonly discussed concept within our culture, making financially intelligent decisions is a key factor in achieving and maintaining stability in our lives, with benefits to our psychological health, physical, and relational health. If you would like to explore your relationship with money, please contact us at www.symmetrycounseling.com.