How to improve your financial confidence

Nearly four years ago, when I was just realizing that I wanted to pursue the financial industry for my career, I faced a fork in the road.

Do I go to school to become a Certified Financial Planner and help people with their investments? Or do I get certified as a coach and help people with the daily financial struggles that come with life?

I decided to take the coaching road mainly because I want to help the people who are not yet ready to invest their money or those who are already contributing to retirement but who are still living paycheck to paycheck every month. Those people are the ones who aren’t getting the support that they need from the financial industry and I aim to help them.

But on top of that, I was also passionate and excited about the emotional side of money. I knew that in order to make long-term, positive change, my clients would need to work on themselves and their own financial beliefs. I’ve been on that path ever since.

Your relationship with money will impact how you behave with your money.

Why Financial Confidence Matters

Your relationship with money will impact how you behave with your money. That means that the more confident you feel about managing your money, the better you’ll do so. Here are some things I know for sure:

  • Emotions play a much bigger role in money than you might think.
  • Our family history impacts how we behave with money.
  • The way we think about money determines how we will act with our money.
  • Sometimes, we’re the ones holding ourselves back.
  • If you don’t think you can do it, you won’t try to do it.
  • If you think you’ll always be “bad” with money, you’ll keep making the same bad decisions.
  • Many of us don’t ask for what we want because we don’t believe we deserve it.
  • Many of us get stuck in the cycle of debt because we don’t think we deserve better.
  • We feel isolated from others because we think we are alone in our financial struggles.

How to Build Your Money Confidence

Just because you don’t currently feel confident about your money management skills doesn’t mean you can’t change that. I’m a big believer in changing your mindset in order to make long-lasting changes in your life. It’s a process that doesn’t happen overnight, but it has to be deliberate and consistent. Below are some simple ways and some not-so-easy ways to improve your financial confidence:

Forgive Yourself for Past Mistakes

One of the biggest reasons many of us feel like crap about our money is because of past mistakes we’ve made. Maybe it’s getting into debt or blowing our savings. But here’s the thing: we all make mistakes. That doesn’t mean we have to suffer for them forever. In fact, the sooner you forgive yourself, the sooner you can move forward.

  • You can’t change the past. No matter how much you try to punish yourself for your past mistakes they still won’t go away. Dwelling on them only causes you to suffer and keeps you stuck in the past. Accept that you won’t be able to change the past so that you can leave it behind and move forward.
  • Your past doesn’t define you. We all make mistakes. But those mistakes don’t have to repeat themselves or stay with us forever. If you’ve made bad financial decisions in the past, it doesn’t mean that you’ll always be bad with money. You’re allowed to grow and change.
  • Focus on future actions. The more you focus on the future instead of the past, the more you’ll actually be able to take action to move yourself forward. Instead of wondering what you could have done differently in the past, focus on what you can do differently in the future.

Get to Know Your Numbers

Knowledge is power. And that is just as true when it comes to your money. I’ve heard time and again from my clients that just filling in the budget spreadsheet I’ve sent them makes them feel more in control. So quit avoiding your numbers and get to know them.

  • Look at all your accounts. You have to know where you’re starting from in order to move forward and make changes. So a good place to start is to look at all of your financial accounts to understand how much money you have and how much you owe. Signing up for a platform like Mint will help you keep all of these organized in one place.
  • Understand your income. If you know how much money is coming in every week, you’ll be more in control of how you’re spending it. Look at your paychecks and figure out what your monthly pay is. If you have inconsistent income, or if you’re paid hourly, figure out your average monthly income.
  • Get clear on your expenses. Look at how much money is going out every month. The first step is understanding your fixed expenses, which are the things you always have to pay no matter what (rent, student loans, utilities, etc). That is your baseline spending number. From there, figure out how much you’re spending on everything else (food, transportation, entertainment). Mint will help you with this task as well. From there, you’ll have more control over whether or not you need to cut back on your spending to fit within your income.

Find the Easy Solutions

Not all financial decisions need to be difficult. Your money mindset can improve just from taking small, easy steps. Finding those small solutions will help encourage you to keep taking more steps.

  • Cancel unused subscriptions. Subscriptions don’t always cost very much alone, but they can certainly add up over time. If you have subscriptions or memberships that you are not using or don’t use very often, consider canceling them. This will save you lots of money over time. If you need help figuring out what you’re subscribed to, sign up for ClarityMoney. Not only is it a budgeting app, but it will point out what your recurring costs are and help you to cancel subscriptions you aren’t using.
  • Delete tempting apps. The internet is a great thing, but it also has made it way too easy for us to spend money. If you know that you tend to spend more than you can afford because it’s so easy, remove the temptation. Delete your most-used apps, like Amazon Prime or Sephora. If you force yourself to get on your laptop and log in so that you can spend money, you might second guess your purchase. Related, remove your credit card information from your online shops. If you have to type in your card every time you want to buy something, you might buy less!
  • Leave your cards at home. This one can be tough for many people, but sometimes you just need to remove the ability to spend money. If you’re just going to work and coming back home, leave your credit cards or debit cards at home. If you don’t have them with you, you can’t buy lunch instead of eating your leftovers. You can’t stop at Target on your way home instead of just going home and making dinner. It’s amazing how much money you can save when you’re not able to actually spend it!

Automate, Automate, Automate

Automation is key when it comes to taking the right financial steps. Automation takes the human aspect out of money. It makes it so that you don’t forget to do things and it makes it so that you don’t decide to spend your money instead of saving it. Automating your finances will make you confident that the right things are happening.

  • Put your bills on autopay. This is especially important if you know that you are forgetful. Set up autopay on all of your bills so that you never miss one. This will protect you from late fees and other penalties
  • Direct deposit your savings. The easiest way to save money is to set up direct deposit. This is vital when it comes to retirement savings, but it is also helpful for your other savings goals. Set it up so that your employer is directly depositing a certain amount from your paycheck into a savings account. You’d be surprised how quickly this will add up!
  • Create a spending account. A great way to make sure you aren’t overspending is to create a checking account that is purely for your flex spending. This means you’d have two checking accounts: one for bills and one for spending. You would calculate exactly how much needs to go into your bills account every month so that you always have enough to cover the necessities. And then the rest (that isn’t going into savings) would go into a spending account. This protects you from overdrafting your bills account and it will also always be clear exactly how much you have left to spend for the month.

Celebrate Your Wins, Big and Small

If you’re like me, you tend to ignore the small wins and only focus on the big ones. But the problem with that is that big wins don’t always come along everyday. And our small wins are just important, and celebrating them will make us feel better about ourselves and motivate us to keep going.

  • Set interim milestones: When you are trying to reach big goals, like paying off a debt or hitting a big savings number, the goals can feel daunting. Thinking only about the big number can decrease your motivation. That’s why it’s important to set smaller, interim milestones so that you can notice and celebrate when you’ve hit them. Allowing yourself to celebrate your wins, no matter how small, more often, will keep you motivated and feeling better about your progress.
  • Track your progress: Creating a way to track your progress as you are working towards a goal will not only keep your mind on the goal at hand, but it will also motivate you to keep going. This can be a digital or physical reminder; it depends on what will be the most useful to you.
  • Treat yourself: Even though I think the “treat yourself” mentality makes people spend more than they can afford sometimes, I do think it’s important to rewards yourself for reaching your goals. Choose a small reward to gift to yourself whenever you reach a milestone along the way to your big goals. This will allow you to add a fun element to the long road towards financial health.

Stay in the Know

This is especially important for women who aren’t the ones who are managing the household finances. It’s totally fine to take a step back, but you should not completely wash your hands of things. You need to stay in the know so that you’re confident you could manage things on your own if need be.

  • Know where your money is: Even if you’re not the one managing the money in your household, you should still understand your financials. You never know if you might end up needing to take over someday. Make sure that you know where all of the money is, including the passwords for the accounts.
  • Learn how to pay the bills: Again, even if you aren’t managing the money at home, you should still learn how to pay the bills. If something were to happen to your partner, you’d still have to pay your rent. Having this knowledge will give you peace of mind and confidence that you’ll be able to handle things if you need to.
  • Fund your own savings account: Even if you’re married, I’m a big believer in having at least some of your own money. You really never know if something might happen and you will need that money to move or support yourself. Having your own savings tucked away will give you the confidence and certainty that you’ll be protected if things go south with your partner. (Note: I don’t condone hiding money from your partner, unless you’re in an abusive situation. Saving up your own money shouldn’t be a secret if you’re in a safe, supportive relationship.)

Pro tip: Use the In Case of Emergency Binder from Smart Money Mamas to keep an organized file of all of the important stuff: financials, healthcare, passwords, etc.

Talk About Money

I’m a huge proponent of talking about more money more often. The more we talk about it, the less taboo it will become and the less alone we will all feel. And there are still ways to do this even if talking about money makes you feel uncomfortable.

  • Be honest: If you can’t afford to go out with your friends, be honest with them about your reasons. Tell them that you’re on a strict budget and you need to be mindful of how you’re spending your money. They might be inspired by you and want to join in on your money saving lifestyle! Or they might just suggest something cheaper to do.
  • Tell your friends your goals: I’ve had a client in the past who though that she was the only one out of her friends who was in credit card debt. The truth was I was also coaching one of her friends who was also in credit card debt! You never know what other people are going through if you don’t talk about it. So be honest about what your goals are. Tell them if you’re paying off debt or if you’re saving up for something. You might inspire them or gain a new accountability partner.
  • Use goal-oriented language: Instead of saying things like “I can’t, I’m broke” when your friends ask you to hang out, using more positive language will be more useful. Say something like “I already reached my dining quota for the week, but I’d love to have you over for dinner instead!” or “I’m cutting back on spending so that I can take a big trip this summer, but I’d love to have you over to watch a movie!” Not only are you being honest about your goals, but you’re using more positive language. This will help your mentality and that of your friends.

The moral of this article is that knowledge is power. The more you understand about your own finances, the more in control you will feel. That control will then lead to confidence. You don’t have to become a completely different person in order to feel more confident about your money, you just have to start implementing small changes over time.

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