How to bolster your financial confidence

568

Kimberly Palmer

AP – Financial educator Melinda Perez still remembers the first time she felt financially confident. She had recently started investing money outside of her employer-sponsored retirement account because she was finally earning more than she spent. “It was exciting because for once, I had what felt like extra money,” recalled Perez, who lives in San Antonio, Texas.

Financial confidence, or the belief in one’s money-related abilities, might not come up as much as financial literacy – especially in April, Financial Literacy Month – but money experts say it’s often the hidden ingredient behind savvy money decisions.

“If there’s no financial confidence, there is no willpower to succeed. We translate that to financial self-efficacy,” said Perez, who also studies financial confidence as part of her research as a doctoral candidate in organisational leadership.

But confidence with money can be hard to come by. According to a NerdWallet survey in January, three quarters of Americans say they do not feel confident about their personal finances for 2023, and many of them cite the uncertain United States (US) economy.

There are, however, ways to boost your financial confidence. Here’s how to get started:

SEEK FINANCIAL EDUCATION

Learning essential lessons around budgeting, saving and investing helps boost financial literacy, Perez said, which can positively impact actions. “To increase financial confidence, we need to increase education, so you know what tools you need,” she added.

Those seeking financial education should start with local organisations and community groups that provide information for free, she added. Finding financial literacy-focussed groups on Facebook or searching “financial education resources” for your area can lead to helpful resources.

“Find your community that talks about finances in a non-judgemental way,” so you have a safe place to ask questions – that community might include friends and social media groups, Perez said.

Your financial institution can also help, said senior director of banking and payments intelligence at JD Power Jennifer White. Banks and credit unions often provide online tools to help customers visualise their cash flow and see how they can improve their savings and credit.

That kind of support is good for consumer confidence and business at the bank. “Once customers feel supported, they are more likely to be loyal when they open up their next account,” White said.

WATCH OUT FOR OVERCONFIDENCE

Confidence plays a big role in day-to-day money and debt management, said professor of family finances at Utah State University’s College of Agriculture and Applied Sciences Lucy Delgadillo. But creating positive outcomes depends on having the right amount of it.

“When you have overconfidence and low knowledge, that’s the worst situation. You’re more likely to get into high-risk behaviours such as overextending credit and overly risky investing,” said Delgadillo.

She encourages people to reflect on their own levels of confidence and knowledge and to tread carefully when there is a mismatch. “For example, to find out the difference between a stock and a bond and to fill in the gaps in knowledge you might have,” she said.