Source: Forbes. By Jeff Rose
When you’re struggling with money, financial confidence is usually nowhere in sight. This could very easily lead to spiraling out of control and getting yourself into a worse position with your money.
How can you gain some financial confidence even when you’re not sure how you’re going to be able to pay your next bill? I’ll show you.
Perhaps your situation isn’t so dire, but you’d like to build some wealth. You’re tired of the mundane and you want to thrive, baby!
Whatever your situation, you can gain financial confidence by following three principles.
The Three Principles of Financial Confidence
In order to build up some financial confidence you must pay close attention to applying the following principles to your life. Neglect one, and you’re done.
1. Commit to achieving your goals.
Also, you must commit for a specific time period – 21 days is a great amount of time to put a good habit into place, but don’t stop there. This could apply to anyone getting out of debt, getting their savings in order, or learning about personal finance.
Another way that you could apply this principle is to getting in shape; say, committing to a 21-day workout program especially if you’ve never worked out before. Try getting into shape with an accountability partner – like your spouse!
My wife and I made a commitment that we were going to pay off all of our debt before I was deployed to Iraq. I had existing credit card debt and some other debt that I acquired right before I left – one of which included LASIK surgery. Each time I got paid we would take as much as we could and apply it to our debt, but the key was that we were committed until we had paid every last penny.
Eric Rosenberg at PersonalProfitability.com thought paying off debt was a worthwhile goal for him, too:
When I started grad school, I knew I had to commit to stay on top of my personal finances, or I would end up in a world of trouble. Two years later, I had paid off the entire cost of my $90,000 MBA and was on the road to success. If I had not made a commitment to myself to get debt free, it would never have happened so quickly.
Eric shows how it pays off (literally) to commit to your goals as early as possible. It was much better for him to pay off his debt early in his grad program than to wait and let it accrue interest.
Natalie Bacon at TheFinanceGirl.com also shared a story with me regarding her commitment to pay off debt:
My commitment to financial success has led me to leave my career as a corporate attorney and make massive strides with my student loan debt (starting at $206k and now at $125k). Having the courage to believe in financial freedom and make sacrifices when my peers are spending wildly has been challenging. While it hasn’t been easy, it’s been worth it. And coincidentally, the process through which I’m achieving financial success has turned into a personal growth journey that I wouldn’t have otherwise had. And for that, I am forever thankful.
Natalie shows how commitment and courage go hand in hand. They led her to make the leap from her career as a corporate attorney to be able to pursue other ambitions that helped her pay off debt. Way to go Natalie!
Speaking of courage . . . .
2. Build up some courage.
Once you commit, you start to build up courage in the process. Courage doesn’t always come before you start your commitment, it builds as you step out in faith.
Courage, like commitment, can also be very scary and often doesn’t feel fun because you might not feel like you’re making any progress.
If you think of it in terms of working out, courage is the burn you feel when you’re pushing yourself to the max. The burn doesn’t feel good and you might not see results the next day, but there is progress being made.
When we were paying off our debt, I could remember feeling like I was making good money while I was deployed, but we didn’t really have a lot to show for it. This was largely in part to the fact that a lot of our money was being applied toward all our debt.
To be able to make it through the courage stage, you have to have some sort of measurable goal so that progress can be tracked. Tracking your progress will deepen your commitment as you begin to acquire capabilities leading to success.
3. Acquire capabilities leading to success.
When you start committing and sticking to your financial goals while building up courage, you’ll soon start to see and acquire capabilities.
If you’re working out, this is the stage when you might start seeing definition in areas of your body that you’ve never seen before. If you’re tracking your credit score or trying to get your credit in order, you might see a few points of improvement on your score.
For us, it was finally seeing our debt totals dwindle down until we eventually paid one card off. That was huge for us. Paying off debt – like losing weight – sometimes feels impossible. But once we had that first card paid off it truly felt like a debt snowball and we paid off the rest of our debt relatively shortly after that.
You see, as you start committing to achieving your financial goals and build up some courage, opportunities to acquire new capabilities will fall at your feet. For example, as we paid off our debt, we had more control over what we could do with our income which resulted in us being able to put money toward our other financial goals – a capability we wouldn’t have had otherwise.
It’s also important to identify your capabilities so that you can build your financial confidence. Are you good at numbers? Perhaps crunch the numbers of your budget for your family every month. Are you good at shopping? Enhance your shopping skills by learning to select more frugal options at the store.
Grayson Bell at DebtRoundup.com explained how he used his ability to think outside the box to reach his financial goals:
My capability to think outside of the box has helped me not only pay off my consumer debt, but change my financial life. I never settle for status quo. I learn new skills to make myself better and more marketable as an employee and business owner. These provide opportunities, which enrich my financial confidence.
Grayson brings me to my next point . . . .
Confidence is the Reward for Hard Work
The result of committing to achieving your goals, building up some courage, and acquiring capabilities leading to success is that you begin to feel confident. There’s a new pep in your step. You’re on top of the world, and nobody can stop you!
There’s nothing like putting on an old pair of jeans that you couldn’t fit into a year ago but now fits like a charm.
For us, not having the stress of paying our credit card bill anymore was huge. That allowed us to shift our monthly income into finally acquiring a meaningful emergency fund. Prior to being deployed, I don’t think we had $500 to our name!
You see, confidence isn’t something you have to have before you start achieving your financial goals. Confidence is built over time through gaining knowledge and experience. Don’t put the cart before the horse – confidence is one of the last goals you’ll achieve on the road to financial freedom.
You’re going to need to commit and build up some courage to continue to take action. But first, you must commit to learning about finance if you want to get anywhere worthwhile.
Jackie Lam at Cheapsters.com agrees that doing the hard work of learning about finance will lead to confidence:
I think being resourceful really helps with financial confidence: from reading materials on financial literacy to coming up with ways to generate different streams of income.
Debt freedom expert Jackie Beck at TheDebtMyth.com agrees with Jackie about the importance of learning about finance to gain financial confidence:
No one is born knowing how to make the kinds of financial decisions that will ensure a bright future. My commitment to learning, dipping my toes in, and adjusting when necessary while staying focused on my goals helped me reach financial confidence. Once you do start to succeed and move toward your goals, your confidence improves even more. Of course there will be failures and setbacks along the way, but using those as learning experiences is critical.
It’s through a commitment to financial education that anyone can be financially confident – see a recurring theme here? It’s persistence that wins the day.
Barbara Friedberg at BarbaraFriedbergPersonalFinance.com agrees that confidence follows persistence during difficult times:
Persistence and discipline are my life mottos. Regarding financial confidence, investing regularly through thick and thin has allowed me to see the fruits of my lifelong priority of saving and investing over spending. Practice smart money behaviors, forget about what others do, wealth and confidence will follow.
Notice that Barbara agrees that smart money behaviors come before confidence. You don’t have to have confidence to make smart choices. Remember that confidence is the reward for hard work.
You Can Gain Financial Confidence Over Time
You might be thinking to yourself, “I’ve never had confidence. I’m not so sure I can gain it over time.” That’s a normal thing to say for someone who has no confidence.
But you see, it’s not true. You can gain confidence over time.
What’s the secret to becoming confident in any social situation? About 10 years ago, when I was just starting college, I would have said, “there is no secret. You either have it or you don’t.”
And I would have been DEAD WRONG.
You see, back then, I had almost zero confidence.
But today I’m thinking about getting “unstoppable” tattooed on my forehead.
You can learn exactly how he obtained confidence over time by watching his video. Essentially, he explains that by acting confident, you can actually become confident. It’s not just true in social situations, it’s true in any situation.
Don’t be confident enough to make uneducated financial choices. But do act confident enough to dive in and learn.
Act confident that you’ll eventually reach your goals. Even if you’re not sure you can make it, take actions like you can make it. You just might find yourself achieving your goals.
If You Fall Down, Get Back Up
You will discover a few roadblocks along your journey to financial confidence. For example, you might find yourself occasionally spending more than you make, forgetting to enter transactions in your budget, or losing money to a bad investment – don’t give up.
If you fall down, get back up.
You don’t have to always be right, you just have to not be too worried about being wrong.
Just like occasional failures, being wrong from time to time is inevitable. People who take the position of always being right aren’t confident, they’re cocky. They think they know everything and they want you to know it too. Ironically, their need to always be right imprisons them from being able to learn from their mistakes.
To build true confidence, you have to not mind being wrong. You have to take a stand, and then admit it if and when you realize your standpoint is wrong. It’s a process of trial and error that helps you discover what is right. And finding out what is right is a lot more important than always being right.
Bottom line: When you’re wrong, admit it and be secure enough to back down graciously, adjust and carry on.
There’s an irony to gaining confidence: some types of confidence are subject to experience. When you’re wrong about something or fail at something, don’t lose confidence in yourself; instead, lose confidence in your particular belief or your particular method.
Valerie Rind at ValerieRind.com talks about how you can rebuild even if you’ve lost it all:
When you lose it all, you have nowhere to go but up. Rebuilding my finances and confidence led to an unexpected consequence: new careers in personal finance and writing.
Teresa Mears at Living on the Cheap (Facebook Page) adds to what Valerie said:
Valerie Rind said part of what I wanted to say: In life, there are certain financial setbacks that are beyond your control, and no amount of confidence or preparation will save you from losing substantial assets and sometimes everything. But knowing what to do can help you rebuild your life and assets.
Commit. Find courage. Aquire capabilities. Over time, as you learn to pick yourself up and dust yourself off, you’ll gain financial confidence over time and realize the reward of your hard work.