Building Your Money Confidence The Right Way
If you are a regular listener of the Her Dinero Matters podcast, you know that, often, the term “money confidence” pops up here and there. Well, that’s not a coincidence. I am a huge believer in the power of money confidence to make your everyday life (and your regular budget planning) just easier. But what exactly is this? And more importantly, how can you acquire it? The proverbial answers are in this article. Shall we dig in?
The first time Marcia felt the brake pedal of her 10-year-old Camry stiffening, a flood of “car questions” invaded her thoughts. Had she forgotten to change the oil yet again? Or maybe the freezing weather had somehow damaged her (almost) ancient engine? The stiffening disappeared after a few minutes into her morning commute, but her uneasy feelings didn’t go away. She decided an impromptu afternoon visit to the service couldn’t possibly hurt.
Thus, when she found herself holding a whopping $1100 quote for a full brake replacement five hours later her disbelief was major. The tiny voice in her head started to panic. It was the middle of August and she already had a full lineup of back-to-school expenses to cover. Saying that this extra $1100 bill felt like a headache is an understatement.
Fortunately, Marcia’s inner rant ended as soon as it started. Yes, having to shoulder a steep bill didn’t feel like a walk in the park, but at the end of the day having a functional (and secure) vehicle was more important. The choice was pretty obvious: not paying for the brake meant risking her and her family’s well-being. Besides, she was certain things would eventually balance out because that unexpected bill was the kind of expense that her budding emergency fund was meant to cover. She was going to be fine.
If you’ve ever faced an unexpected financial situation that threatens to throw you off track for good (or, at least, that’s how it feels on the spot), you are probably familiar with the rush of destabilizing feelings that come with it. The key to keeping your cool under such circumstances is reacting in a way that doesn’t overwhelm and/or overpower you.
But, how exactly do you do that? Well, that’s where money confidence comes into play.
Defining Money Confidence
Before we talk about the actionable tips, let me clarify what I believe money confidence is. According to our good old friend, the Merriam-Webster dictionary, confidence is the “faith or belief that one will act in a right, proper, or effective way”. I love this definition because it points out an essential aspect of confidence: the fact that it is a belief (which, in turn, means it’s something you get to learn from an outside source).
Now, if confidence is the belief that you will act effectively, money confidence must be the belief that you will act right when money is involved in the equation. Whether we are talking about creating a monthly budget, making a plan to pay a certain amount of debt, or implementing a savings plan for the first time, having money confidence means that you are able to figure things out using the pieces of information at your disposal.
Can you imagine what your life would look like if you could disentangle all your money roadblocks, day in and day out? I most definitely can. For starters, I would stop second-guessing big financial decisions or taking ages to just “sit down and consider the pros and cons” of X or Y. I would move faster through the decision-making process, knowing that even if something goes horribly wrong, I’ll eventually be able to find a way out. And this is why having a good dose of money confidence matters so much.
Why Money Confidence Matters
When you go through life believing in your ability to figure things out and make things happen (even if, in the moment, the decision feels hard) you free yourself from the constraints of fear, from the malicious grip of your anxious thoughts. Money confidence is the best antidote to the kind of decision paralysis that lives, rent-free, in the heads of folks who have started to pay close attention to the inner workings of their finances.
If you still don’t quite buy this, let’s do a quick thought exercise: think about the first time you had to make a big money decision. Maybe you were considering applying for a new credit card, getting pre-approved for a mortgage, or just decided to make a big purchase (I see you, dream vacation!). Now consider how much time you spent “deciding” the ins and outs of your master move. Did you spend hours googling the “ best credit card to build credit in 2024”, reading mystifying performance reports from a popular ETF, or having intro convos with 10 different mortgage advisors?
Ok, maybe you didn’t go to those extremes, but I’m sure you get the point. Taking the first step towards something always feels hard (if not outright impossible) because you just don’t know what to expect. However, once you learn the basics and start to develop a sense of trust, things move way, way faster.
And this leads to the big million-dollar question of this article. Yes, money confidence is important, but how do you get it? What do you have to do to acquire it? The answer is in the learning process itself.
Becoming Money Confident: The process.
“Increase your money confidence in six months” may sound like a far-fetched and wildly exaggerated statement, but let me assure you: it’s not. There’s nothing woo-woo or magical in the process of becoming more money-confident. All that it takes is practice (a lot, in fact).
The good news is that the process of developing your money confidence is no different from the one your brain resorts to whenever you make your first attempts at learning a new skill. Think about a skill with which you engage every day without even thinking about it. For me, the best example of this is driving. A skill that, at a surface level, seems straightforward and no-nonsense allowed, but in reality is anything but. I only have to recall my first driving lesson and, in general, my first few weeks as a brand new driver to marvel at the enormity of the task (bear in mind that I learned to drive in a car with a manual transmission and a clutch as stiff as fence picket).
I still remember the first hour of that first lesson, when the instructor calmly explained the inner workings of my manual transmission and how I was supposed to shift gears as if it were the most obvious, self-explanatory thing. At some point, I told him there was no way I could remember all that while on the road, but he just smiled and reassured me I would. Two months and several engine shutdowns later (emphasis on several), I found myself cruising through town and shifting gears without a second thought. I had made it and I couldn’t believe it.
In the same way that I and millions of others have mastered the inner workings of a manual transmission, you too can pick any skill you set your sights upon. Money confidence is no exception. All you have to do is follow this simple, 2-step framework.
- Practice makes perfect, but start with simple items. Just as you wouldn’t kickstart your investment journey by using all your life savings to buy bitcoin (did anyone say risk?), you can’t really start your money confidence journey expecting to nail down your 5-year financial plan in one evening. Instead, start small and build up from there.
- Challenge yourself continuously. Because, as you progress, things will become easier. The best way to keep improving is by slowly adding complexity to things as you improve. Have you finally managed to stick to your budget for a full week? Then it’s time to aim for the month. Have you made your first contribution to your savings account? You might want to jump on the monthly contribution wagon. Truly, the growth possibilities are endless.
Wrap-Up: Everyone can become Money Confident
If this whole post is making you think “All these things may work for someone else, but not for me because…” I will stop you right there. Deep down inside, you know that’s not true (plot twist: if you are ready to ask yourself how that belief came to be, my quick guide to help you uncover your money story might come in handy).
Just as everyone can learn how to drive, we all can increase our money confidence through consistent practice. The specifics, such as nationality, gender, cultural background, income level, and education do not represent an impossible roadblock. As long as you find a way to practice that makes sense for you and your circumstances, your money confidence will reach new heights. Promise.