Financial confidence matters more so now than ever before. Inflation is rising. The government doesn’t know how to deal with high inflation. Wages are stagnating. Employees are working harder than ever before. The good news is that there’s always a way to be confident with money.
Money confidence doesn’t just magically come to you out of nowhere. Money confidence is something that is worked on every single day for years on end. Too many people expect to be millionaires overnight and they end up not being millionaires. Even when they had a great chance to.
When I first started the financial independence, retire early movement, I had no idea what I was doing. I needed help and guidance from the people who’ve already done it to move forward. After years and years of learning, that’s when I figured everything out.
Financial confidence isn’t a natural talent ability. It’s something that is learned. It’s freeing when you know where each dollar of your money should go to. When you know exactly how you should spend the money that you are paid. The ones who are poor doesn’t know where each dollar should go to.
The poor are hesitant what they should do with their money and they end up spending it because, well, “what’s the point of money if you don’t use it?”. Financial literacy is the real pandemic that needs to be addressed across the world.
There’s nothing wrong with being richer and ultimately be financially confident.
What is Financial Confidence?
Financial confidence is the confidence you feel with things related to money and finances. It ultimately is a reflection of your own financial well-being. There’s no use in being financially confident if you are not actually financially stable or comfortable.
The classic litmus test when it comes to financial confidence is by point blank asking yourself, “am I doing well with money?” and then objectively answering that question. Another way to check if you are doing well with your finances is to benchmark yourself against others at your age.
There’s no point in having financial confidence if we are not objectively doing well with our finances. If we have confidence when we are not actually doing well with our finances, that’s fake confidence. Fake financial confidence ruined lives because people had to declare bankruptcy.
There are people who were confident with their finances only to have to declare bankruptcy because they took on too much debt during 2007 – 2009. In times such as these, having a good defensive play such as padding up your emergency funds is a great decision.
The ones who have the money confidence and to navigate through the waters of a challenging investment environment will be the ones who come out ahead. The relationship between asset ownership and money is quite fickle and has to be managed very well to get ahead!
How to Boost Financial Confidence
The great news is there are many steps and decisions you can make to boost financial confidence.
1) Financial Literacy Breeds Financial Confidence
The ones who are very financially literate have great financial confidence. Financial literacy doesn’t just mean “spend less than you earn”. There’s more steps and nuances to that that people don’t consider. There’s investing, raising credit scores, raising income, side hustles, and many more.
Financial literacy is the number one key to having confidence with money. When I didn’t know what I was doing, I didn’t have any confidence in my ability to increase my net worth. Now, I increased my net worth to many multiple 100k’s, and I’m happy to be in this position.
These days, there are many free resources to be financially literate with your money. There are YouTube videos, blogs, podcasts, books, and many more resources to take advantage of. It’s shocking but many people give out this information for free.
It’s how I got my start and learned my way to be richer.
2) Increase Income
The way to increase financial confidence is by making and having more money. Now is the time to start a cash flowing business or change jobs or do anything you possibly can to increase your income. An extra $1,000 per month will do wonders for your mental health.
When your money is taken care of, you have less stress. 72% of Americans are worried about money. There’s a reason why the majority is worried and stressed about money. It’s because they don’t have enough to cover their lifestyle expenses.
Many people think their finances are taken care of until a recession and a multi year long bear market persists into the market. That’s why diversifying your income sources and making more money in general is key to being comfortable with money and finances.
These days, there are many opportunities to make more money. You just have to put your head together and work on it.
3) Start a Side Hustle
Side hustle was a luxury just 10 – 20 years ago. Now, they’ve almost become a necessity. Side hustles are great in that not only do they have the potential to make you more money, they diversify your skillset as well. It makes you more marketable to another company.
I would have never known what SEO and social media influencing was until I started my blog. Not only do I earn money from them, I have a ton of fun in doing so. And this is just a side project. I can’t imagine what I’ll be able to accomplish if I ever get laid off and I can spend my efforts working on it full time.
Many people make money excuses and say why they can’t start a side hustle. They don’t have the time or they don’t have the money or a hundred other reasons why they can’t put in the work in order to make more money. EVERY body has the potential to make more money.
You’re no different.
4) Practice Delayed Gratification
When you can control your urges and spending, you have control over your financial destiny. In our current economy of “I want it all and I want it now”, people have a hard time practicing delayed gratification. We don’t need to buy the latest toy the day it comes out.
All we need is to bide our time until it goes on sale or when someone sells their used device to somebody else. Financial confidence is when you know you can keep the money that you earn. It doesn’t come with knowing that you can spend everything you have.
Many people don’t understand just how crucial learning about money actually is. These days, I’m so good at delayed gratification that I do not spend a lot of money on a month to month basis. One month, I only spent $500 on my credit card and that was it.
5) Trim the Fat
No matter how little we spend, there’s always a way that we can trim the fat more and spend less money. Every year, I look for ways to cut down on my costs. Whether it’s furniture that I already own so I no longer need to buy again or a car that lasts me decades.
There are many ways to trim the fat and boost financial confidence. In a bear market such as 2022, I spent so much less money month after month. There’s not a lot of things that I need to buy to keep me happy. I only spend around $300 per month on food.
Even with the high inflation that we have going on. There’s no need to buy clothes every year when the ones you have right now are working just fine. There’s no need to get the latest iPhone if for 1. You can’t afford the cost and for 2. You don’t need it.
There is always a way to trim costs and live a leaner lifestyle.
6) Track Your Spending
If you know you can afford to spend, what’s the worry? I keep a $500 per month fun budget in my pocket so that I am not allowed to feel guilty about spending any of it throughout the months. That’s financial confidence. Not having to worry about whether you can spend money or not.
But knowing that you already have a budget in mind gives you the confidence in order to spend a certain amount of money, guilt free. The ones who don’t know where their dollar goes out to and in to are the ones with fake financial confidence.
At times like 2022, I’ve been tracking my spending to overdrive. I want to be financially protected no matter what happens and I’ve been saving more money than before. Aside from the essential expenses, I haven’t spent anything beyond that. It’s back to the basics of personal finance for me.
And I’m OK with that.
7) Invest
You can’t be financially confident if you do not invest your money. No matter what, investments have done phenomenally well over the long term. Whether it’s investments in cash flowing businesses, stocks, bonds, or real estate, investing your money is crucial.
In times such as the bear market of 2022, there’s nothing wrong with taking some risk off the table and rebalancing into cash. Savings accounts have been yielding a massive 3% recently. Personally, I’ve been in the investing game for the past six years and I took some risk off the table.
In order to pad up my emergency fund and in order to protect myself in case I lose my employment. Investing my money is the entire reason why I grew my net worth to over $400k+. I would not have gotten there just by saving alone.
Money is meant to be put to work. It’s the best employee you’ll ever have.
8) Live a Minimalist Lifestyle
Simple living is better than complex living. There’s no reason to get the latest and stylish clothes if the ones you have are just fine. In fact, my closet is full of clothes that I know I can’t rotate out throughout the year even if I tried. Financial confidence is when you know you don’t need to spend a lot of money.
In order to just stay alive and exist. The most underrated hedge against a recession is to spend as little money as possible. That way, you won’t need to spend money if you were to ever lose your job. People think their employment and jobs are forever until they aren’t.
I currently live a minimalist lifestyle and it’s the best thing ever. I don’t spend much money on clothes, furniture, electronics, and the like. Everything I have, I’ve been using for a year or more. It’s been a great advantage that I use in order to give me the confidence that everything will be OK.
The less clutter in your life, the better off you are.
9) Surround Yourself with Others Who Have Financial Confidence
You are the average of 5 people you spend the most time with. If you spend time with 5 people who aren’t financially confident, you will be the sixth. The people I spend the most time with are all online. They are some of the brightest and the richest people I learn from.
It’s one thing to have fake financial confidence, when someone is feeling fine when they shouldn’t be. But it’s another to surround myself with people who have actual money confidence and the ability to protect themselves in a tough bear market.
I learned so much from the people who I surround myself with. They’ve taught me a lot in terms of business, building wealth, and starting side hustles. My mindset and thinking shifted so much due to their influence. I can’t wait for the future that’s ahead, even know I know it’s going to be difficult.
Your friend group influences your mindset and decision making more than you know.
Financial Confidence is for Everybody
Financial confidence is not just for the select few. So many people are so financially insecure that they think they need $10M in order to retire. That’s ludicrous! $10M is an extra $400,000 in yearly cash flow that they can spend until perpetuity.
There are many people who know how to earn money but they don’t know how to manage it to make them wealthier. These are the people who are financially insecure. Many people think they need millions to fund their retirement. That’s just not true.
It is expensive to exist and live but it is not THAT expensive to live and exist. Not even in today’s standards with high inflation and the like. For me, personally, I only spend close to $20,000 per year. I know that number will ramp up as I have a family.
However, even then, I know I can still find ways in order to lower and protect my costs and spending. That means, theoretically, I only need $500,000 in order to retire using the 4% rule. Although I am close to that goal, I am trying to increase that number in order to increase my margin of error.
That’s how I know I’ll be truly financially confident. Financial confidence is for everybody and everybody can achieve it as long as they put in the work and ride out bumps in the road. No one ever became rich overnight and 99% of us will not be the exception to the rule.
How to Boost Financial Confidence: 9 Ways
- Financial literacy breeds financial confidence
- Increase income
- Start a side hustle
- Practice delayed gratification
- Trim the fat
- Track your spending
- Invest
- Live a minimalist lifestyle
- Surround yourself with others who have financial confidence
