There’s nothing like financial confidence, the splendid sensation that you’ve got everything under control. Increase financial confidence, and soon you’re strutting around like a superhero, ready to deal with anything.
But it can be a bit elusive, especially for women. It’s easy to slide into “what-if” thinking and the familiar feelings of worry. Like nausea-inducing dread or thoughts endlessly looping in a spiral of impending doom.
As unpleasant as it is, worry can be a helpful signal. It can alert you that something is wrong—something you need to fix. So instead of ignoring it, let’s convert worry to confidence through action.
This post covers the common financial worries or concerns most of us have. It provides ways to increase financial confidence by assuring your “inner worrier” you’ve done everything you can.
You make the gradual shift from financial worry to financial confidence by taking charge of your money. Every step you take increases your confidence.
Let’s get started.
What’s Financial Confidence, And How Does It Affect Your Financial Health?
Financial confidence is the warm, comfortable feeling you get when you have your financial life under control.
It’s a lack of worry. Not having money front and center in our thinking is financial confidence. It’s when money fades into the background of our lives. Money becomes nothing more than a powerful tool to support us.
Financial confidence matters to your financial health because it’s part of a healthy money mindset, one of abundance.
Plus, confidence by itself is only a feeling, but it impacts your behavior. It gives you the energy to nurture and develop healthy financial habits. You feel “agency” or a sense of being in control.
When you work towards financial confidence, it means you are taking positive action. Action that then promotes stronger feelings of confidence.
It’s a positive, self-reinforcing loop that can vastly improve your money mindset.
Actions to Increase Your Financial Confidence
Increasing your financial confidence is an ongoing process. Like any worthy goal, it won’t happen overnight. Same as when you work towards financial independence, there are different degrees.
To get you moving in the right direction, here are some key actions to promote financial confidence in your life.
Make A Map for Your Money and Hide the Treasure (From Yourself)
The first step is to understand your financial situation. You need to know where you are currently and what you have to work with. Not knowing where you stand financially leads to fear and worry.
Let’s look at two narrow slices of a financial plan to get you started.
1. Develop a Budget or Spending Plan
Yes, I know, you don’t want to hear this. But step one is to develop a budget or spending plan, your money map.
How does this relate to financial confidence? Well, the “unknown” drives anxiety, so the very act of creating a budget or spending plan can reduce anxiety and worry by itself.
You can see your income in relation to your spending in clear focus, not through the fuzzy haze in your mind of what you think it is.
Create a plan, so you know how to adjust your spending when needed. When you know your spending by category, you can quickly adapt to anything that may come up. Without this information, it’s more challenging to make the intelligent reductions or cuts you might need.
Having this “money map” can keep you calm in a financial crisis. It also helps you figure out how much you can save for your future.
2. Automate Your Savings and Investing Plans
Once you get an idea of how much you can save and invest each month, fund your accounts automatically. If it’s a manual process, there will be more temptation to touch the money you’ve saved or invested.
Plus, when you automate your finances, you remove the need for both willpower and endless decision-making. It’s one less thing to burden your brain with and one less thing to remember to do.
If you’re an employee with access to a retirement plan such as a 401(k), automation is easy. Sign up with the plan, and the money is deducted from your paycheck before you can touch it.
If you don’t have access to an employer’s program, set up your own (like contributing monthly to an IRA). Contact your bank or investment institution to get the specific details on how to set it up through them. They should be happy to help you with this!
It’s one less thing to worry about. Automating your savings and investment plans builds financial confidence because you know you’re taking care of your future. It builds a bridge towards the ultimate state of financial confidence—financial independence.
Avoid This Financial Confidence Killer and Stay Vigilant
The number one way to trash financial confidence? Debt. Debt eliminates options for what you can do with your money.
Your lender needs to come first, always. Otherwise, your credit reports get dinged, and you’ll pay even higher interest rates.
Debt can be an unavoidable part of life, so you want to make sure you have healthy credit when you need it.
3. Destroy Your Sleep-Depriving Debt
If you have debt that prevents you from sleeping at night, this is for you.
First, take a deep breath. You’ll be facing a strong headwind if you try to develop financial confidence while upset about the past. There’s nothing for you to do in the past except to identify what went wrong.
If getting into debt was something you could have prevented, figure out how to avoid it going forward. For example, if credit card debt is an issue, try saving up first before your next large purchase.
Either way, the next step is to take action to fix it.
If you’re in debt way over your head, look for a credit counselor for help. Build your confidence by including a debt payoff plan in your budget and celebrate every time you pay it down. Then when you pay it off, do everything you can to avoid getting into debt again.
Debt is financial kryptonite.
4. Pay Attention to What the Big Three Agencies Say About You
Even if you don’t intend to borrow money anytime soon, it’s a good practice to check your credit regularly. You want to confirm there aren’t any errors on your credit reports and that no one has stolen your identity or hacked your credit.
The big three credit reporting agencies are Equifax, Experian, and TransUnion. You can check the reports they collect on you at AnnualCreditReport.com. (Be careful and only use this site, as there are copycats who will charge you money for this otherwise free service.)
Before you borrow money, you’ll want to double-check your credit reports so you can fix what you can first.
By checking your credit reports regularly, you can keep them error-free. You also stay vigilant against potential fraud.
Knowing that your borrowing power is there for you if you need it is yet another confidence booster.
Build Backstops Against Financial Disasters
Obviously, none of us can prevent bad stuff from happening in our lives. But we can lower our risks and set up systems to protect ourselves.
Here are a few ways to avoid or offset financial disasters. These strategies may help “what-if” worriers sleep at night. Or at least worry about something else besides money.
5. Forge Your Financial Body Armor
As we experienced during the COVID-19 disaster, having an emergency fund is critical.
An emergency fund will give you confidence when dealing with unanticipated expenses. The amount to set aside can range from enough to cover small financial hits to a large buffer of one full year of basic living expenses. Determine what you need to feel comfortable with.
A savings account or no-penalty CD is best. Risky investment vehicles are not the place for an emergency fund. Yes, you will probably lose some money to inflation, but at least the cash will be there when you need it.
6. Aim to Spend Less Than You Earn
Not spending everything you earn builds in a buffer against the unexpected in life. Events like pay cuts, loss of an important client, or a relative moving in with you can be easier to deal with when you have a buffer built-in.
Life is less stressful when you have room to maneuver financially.
Spending less than you earn provides financial resilience. It also allows you to build up your savings (and an emergency fund).
Frugal living or spending less than you earn can be a fantastic way to build financial confidence.
7. Spend Money to Protect Your Money (and Dependents)
Be frugal, but don’t be cheap on insurance. Having enough insurance is an essential part of feeling financially confident.
You need protection against the big unknowns, the catastrophes we all hope won’t happen to us. Your emergency fund should cover the deductibles or small losses—insurance is for the losses that could wipe you out financially.
Some insurance types to consider (depending on your personal situation):
- Property & liability insurance for your house, car, motorcycle, boat, or other pricey assets that expose you to potential liability.
- Renters’ insurance on your belongings (if you’re a renter).
- Umbrella or excess personal liability insurance for liability protection over the levels provided by your other insurance policies.
- Health insurance for protection against large medical bills.
- Disability insurance to partially replace your income if you can no longer work because of a disability. At least consider long-term disability insurance (if you have adequate emergency funds, you may not need short-term). According to the Social Security Administration, “The sobering fact for 20-year-olds, is that more than 1-in-4 of them becomes disabled before reaching retirement age. “
- Business insurance if you have a business and assets to protect. Here’s a guide from the SBA with an overview of six common business insurance types.
- Life insurance can provide for your dependents (people who rely on your earnings for their living expenses) if you cease living.
Of course, this isn’t an exhaustive list, but consider insurance as a way to bolster your financial confidence.
Overcome Gaps in Your Knowledge
You know the drill. Once upon a time, we had pensions, Social Security would be there for us, and we could look forward to a decent retirement at 65.
But not now. Pensions are rare, and Social Security benefits are constantly “at risk.”
Unfortunately, responsibility for your retirement (aka financial independence) rests entirely on your shoulders. Learning about personal finance is no longer optional.
8. Level Up Your Financial Literacy
Fill in any gaps in your financial literacy by beginning with the basics. Understand topics like budgeting, credit, debt, insurance, and saving and investing. Especially learn about the vast difference between saving and investing.
Because we are all our own “investment managers,” we need to gain a solid understanding of investment concepts. This will give you the confidence you need to decide how and where to invest your money.
Read all you can to help you understand money better. I’m working on a list of recommended resources, and if you join my email list, I’ll update you as soon as it’s done. You need to be careful who you learn from, and I’ll only recommend trustworthy sources.
The more you know, the less likely others can take advantage of you.
“Knowledge is power.” – Sir Francis Bacon
Knowledge is protection as well. The more you learn, the more power you keep, and the more confidence you develop.
Increase financial confidence through financial education.
9. Learn How to Hire Financial Help
As you learn more, you may realize you want help with your financial plan. You may want to hire a financial planner, counselor, or coach.
But do your research first. This will give you the confidence you need to hire the right person for you.
For example, you want to understand the importance of a fiduciary and the legal difference it makes. Here’s a quote from Investopedia’s excellent article on this topic:
“A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.”
Understand the difference between various financial planning, coaching, or counseling certifications. Know who you’re hiring and what laws may (or may not) be in place to protect you.
FINRA, a “government-authorized not-for-profit organization that oversees U.S. broker-dealers,” has a great resource. It’s an alphabet soup decoder ring. Simply type in the letters of a certification, like “CFP,” and it provides a handy starting point for your research.
Protect and Nurture Your Geese
Remember the tale of the goose who laid the golden egg?
Keeping your “geese” protected and feeding them well keeps those golden eggs coming. And the more geese you have, the more confident you can be.
10. Invest in Your Marketable Skills
Starting right now, think in terms of marketable skills, not your job. Your actual job isn’t as important as the skills you maintain or develop while doing it.
Because skills you have control over, jobs you don’t. The next economic downturn can obliterate your job by bankrupting your employer. You could lose your job through no fault of your own, like by merely growing older.
To protect your income:
- Keep up with trends in your industry, field, or occupation.
- Watch for any changes in the critical skills required or desired by those who pay for them.
- Focus on the continuous improvement of your marketable skills. Set aside money each year to invest in yourself—in your skillset. Take classes, attend seminars, and keep learning and growing. If your company offers a continuing education benefit, be sure to take advantage!
Having up-to-date, lucrative skills can turbocharge your financial confidence.
11. Maximize the Money for Your Time
If you’ve carefully cultivated your marketable skills, the next step is to make sure you earn at least market rates for your labor.
If you’re an employee, negotiate your salary!
Honor the time and effort you put into your job by ensuring you earn the most you can.
Women tend to avoid salary negotiation, which is one of the reasons for the wage gap between men and women. But this is something that’s actually under your control (the asking part, not the getting part), so it pays to at least try, right?
Do your research and be prepared to negotiate. This article on glassdoor.com provides an overview.
If you have a service business, please charge at least market rates or rates reflecting your skill level. Cutting rates on a “race to the bottom” will have you working for the worst type of clients—ones who don’t value your worth and who will erode your confidence.
If you can negotiate your salary or charge clients even a little more money, think of how this could increase your financial confidence.
12. Develop Multiple Streams of Income
Developing multiple streams of income can take any combination of work, time, and money.
But it results in the ultimate level of financial confidence.
It’s true independence when you don’t rely on only one employer or one large client for all or most of your income. Even just a small amount of extra “side” income can boost your confidence.
The three main categories to create additional income (and build wealth in the process) are:
- Paper or Portfolio Assets (stocks and bonds are common examples)
- Real Estate (think of rental payments)
- Businesses (including tiny businesses like side hustles)
A side hustle or your own small business requires your time but may not need a lot of money to get started. As a bonus, the benefits of being your own boss are more than just financial. It can provide a way to challenge yourself and grow!
The possibilities of how to achieve additional income are endless. The more income streams you can get up and running, the higher your financial confidence grows.
Increase Your Financial Confidence by Becoming Your Own Superhero
Start to increase financial confidence by implementing one of the ideas above. Pick something that currently causes the most worry in your life. Take action to address it and watch your worry decrease from a roar to a whisper.
Start now to save “future you” from a life of worry and anxiety.
Taking one small action may not seem like much, but it creates forward momentum. Feel the power of increased confidence and let that inspire you.
Please remember that most of the big, worthwhile goals in life aren’t achieved all at once but in the small, day-to-day actions you take. It takes time, but eventually, one day, you’ll feel the soft, flowing fabric of that formerly elusive cape.
You’ll bask in the warm glow of financial confidence. You’ll have become your own financial superhero. And it all begins by taking action, today.