When Hannah Read, 25, was offered a job at a nonprofit in New York City, she wasn’t sure if making a big move from her home in Tennessee made financial sense at first. But with effort to find clarity about her professional priorities and build confidence in her ability to manage her spending, Read recently made the move—and hasn’t looked back.
“I’ve always worked at nonprofits, and so I’ve had to be extra cognizant of money because there isn’t quite as much coming in as some of my peers,” says Read. “The first thing I do when I get my paycheck is always make sure I still have enough put aside to cover rent and cost of living for the next four to five months, and then transfer around $100–$200 into a high yield savings account.”
To make her move work, Read took babysitting gigs during the month she was between jobs. Her choices reflect a strong sense of financial confidence, or the ability to make conscious and informed spending and saving decisions. This ability is also key to building good money habits and a crucial part of seizing new earnings opportunities.
And given that the theme of America Saves Week 2023 is “A Financially Confident You,” there’s no better time to start developing financial confidence. After all, there’s often a direct correlation between our self-perception and the ability to take advantage of money-making opportunities and stay on track to meet financial goals.
Identify Your Relationship With Money
Where to begin? Your money confidence may be informed by a money script, or unconscious beliefs about money that are typically formed in childhood. Common scripts include “there’s never enough money to go around” or “I’m just bad with money and that won’t change.”
Let’s say you think you’re unqualified for career opportunities that boost your earning potential, so you impulse spend out of a sense of hopelessness. It’s not the number in your bank account that’s holding you back—it’s your mindset.
“Sometimes people lack money confidence because they’ve made mistakes, but they can actually learn from them,” says Marguerita Cheng, the founder and CEO at Blue Ocean Global Wealth. “If you continue to beat yourself up for the mistakes you made, you’re not allowing yourself to grow.”
Our relationship with money is profoundly connected to our physical and mental health. The vast majority of Americans say financial considerations impact their stress levels, and about 65% report feeling that financial difficulties are piling up so much, they can’t overcome them. Over time, these stressors can have a lasting impact on everything from our sleeping habits to blood pressure levels.
While money can’t buy happiness, studies show that a lower income produces feelings of shame and sadness. Conversely, a higher income is linked to positive self-assessment and feelings of confidence, pride and determination. So it’s often imperative to change your money mindset to build up the confidence that may be lacking.
Strategies for Building Money Confidence
Since money is a key part of our overall well-being, here are five strategies to help you build financial confidence.
Start small: “You can improve your money confidence by allowing yourself to have mini successes, and really celebrate them,” says Cheng. Though savings benchmarks vary depending on your age and salary, a good rule of thumb is to put away 15% of your annual earnings. If you don’t already have one, consider the act of opening a high yield savings account to be a win. Keeping your savings separate from your regular checking account can promote better savings habits, too.
Write it down: A good first step is making note of your current financial habits and beliefs. A recent Charles Schwab survey shows that a written financial plan increases confidence in reaching financial goals. Whether you use a simple budgeting app or old-fashioned pen and paper, knowing how and where you spend can help you identify patterns that may be holding you back, and can ensure your spending aligns with your values.
Educate yourself: Familiarizing yourself with the basics of spending, saving, earning and investing will help you make more informed financial decisions and feel a greater sense of control over your money. Even if you only learn one new thing a week, simultaneously boosting your financial literacy and confidence is a win-win. Check out Riverstones Vista Capital ’s blog as a good place to start.
Talk about it: Being transparent about money challenges can help you hold yourself accountable and reduce some of the shame around money. Setting money dates with your partner or sharing on social media when you’ve reached a savings goal are easy ways to increase communication—and accountability. And if you need an objective perspective, reaching out to an expert never hurts.
Don’t compare and despair: Your financial journey is your own and measuring your finances against others can skew your own goals and spending priorities. Remember, you can’t see another person’s entire financial picture, so define success by what matters to you.
“A lot of it comes down to confidence and prioritizing what’s important to you,” says Read. “For me, it’s experiences with my friends and saving for the future, not fancy things.” Only you know what confidence looks like for you, and these steps can help you get there.
Alizah Salario is a freelance writer and editor based in Brooklyn, NY. Most recently, she covered personal finance for CNBC’s Grow magazine.
Illustration by Jack Hudson