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Adulthood is a crazy time in life. One day you’re asking for permission to use the bathroom, and the next you’re paying bills and dealing with taxes. Most young adults enter into this phase of life without much preparation, often being thrown into the deep end without a life jacket. But while it can be overwhelming, financial confidence can be built with a few simple actions.
Money management for young adults is an all-or-nothing affair. In the pursuit of financial fitness, young adults feel they must jump headfirst into the deep end of high-priced savings accounts, investing, and financial planning. They think that they need to make $100,000 or more a year, have a huge portfolio of stocks and bonds, or create a 5-year plan to be successful financially. But this is not true.
Financial confidence isn’t typically the result of one huge financial move. More often than not, it’s the result of a long line of very small financial moves.
While we wait for that financial magic to happen, we work to establish small habits, developing confidence in our financial matters without getting into stress.
Shift Your View from Fear to Curiosity
For most young adults, their bank account is something they avoid looking at. Like an unopened bill that has been sitting on your desk for weeks, the fear of what you may find in your online banking can bring on a lot of anxiety. The way we view our money greatly affects our financial well-being. This is why the first step to building financial confidence is to shift our view from fear to curiosity.
The first step to building up financial confidence is to shift your focus from being scared of your money to viewing it with curiosity. Treat your bank account as a source of information about where your money is going instead of a source of fear or a means of judging your self-worth. By viewing your bank balance in this way, you can treat your finances with the same sort of detached curiosity that you would apply to any other aspect of your life. The data from your bank account will help you make all sorts of decisions about how to manage your money. When you view your bank account numbers with such detachment, you can use the information from your bank account to your advantage, allowing you to make informed decisions about your money instead of letting it cause you stress.
This is the point when one small change in your perspective can bring about huge changes in your financial confidence and your life in general.
Start by scheduling a five-minute check-in every week. Pick a time and place that is least stressful for you. For me, that’s Sunday morning with a warm cup of coffee in my living room. I log into my bank account online and review the past week. I look at what money came in and what money went out. I also review what is coming due in the next week or so. Having a regular time to review my finances removes the element of surprise that can cause so much stress and anxiety.
Set Up Your Financial Foundation
Another important step to establish financial confidence is to set up a financial foundation to work from. This means that you set up a separate space for your spending money and for your goals. By keeping your money in separate places, it’s easier to track your spending. This will also help you avoid accidentally using money for bills or for saving. This is especially important since there are so many tools available online to set up a checking account in just minutes.
Having separate spaces for your goals will make it easier to see your spending and know whether you can afford something. For example, instead of putting all of your money in a single savings account, you could have a checking account for daily spending and separate savings accounts for other goals. Thanks to modern digital tools, you can easily apply for a checking account online in just a few minutes, giving you a fresh, clean foundation to manage your daily cash flow.
Creating structures such as setting up systems to automate your good financial habits, such as a small automatic transfer to a savings account every payday (even $20 per paycheck), will assist in allowing you to develop your financial confidence and recognize your progress.
It feels good. Really good.
Learn the Art of the “Micro-Pause”
Impulse spending will be another hurdle for you to overcome in your quest for financial confidence. In today’s world, the majority of purchases are now impulse, and many of them can be made in the dead of night from the comfort of our own homes. It’s hard enough to say no to yourself at the best of times, but to make a rule of saying no to every non-essential purchase is to set yourself up for failure. We’re not talking about cutting out every fun purchase and living on instant noodles; we’re talking about not letting your money slip through your fingers in a moment of madness.
Instead of immediately purchasing items online, practice the micro-pause. Put the item in your online shopping cart and go do something else for 24 hours. Maybe go for a run, watch a movie with your loved ones, or read a book. In that time, you can assess whether or not the item you were considering purchasing will bring you joy. Will it bring you a fleeting sense of pleasure for a short time, or will it bring you long-lasting joy? In the end, remember that the urge to make a purchase in the moment will likely pass.
During that time, ask yourself the following questions: 1) Will this make me happy in a week or so, or will it bring me joy for 10 minutes? 2) Am I buying this because I want it or because I had a long day at work and I deserve something?
While waiting 24 hours to purchase an item may bring up both good and bad reasons for waiting, typically the urge to buy will pass within the 24 hours. Recognizing that you are in control and that waiting is good for you builds financial self-trust.
Celebrate the Small Wins
The big financial milestones can be celebrated many years down the line (e.g. when you’ve paid off a whole loan or even bought a house), but that means the long journey towards them can feel like a never-ending slog and be a real drain on your energy. So why not celebrate the small wins along the way?
Celebrating your successes, no matter how small, is important. Remember that you’re trying to change your spending habits, so if you cook dinner at home three nights in a row, that’s a win. Canceling a subscription service that you haven’t used in months is a win. Looking at your credit score without wincing is a win.
As you grow financially, recognizing your small successes along the way is just as important as acknowledging the major accomplishments. So many people ignore the small victories to focus on saving up for that perfect house, car, or dream vacation. However, recognizing and celebrating these small successes can be very important for several reasons. Building financial confidence is similar to building physical strength, for example. If you walked into the gym on day one and started lifting two hundred-pound weights, you would more than likely fail and never return. This is because you are starting with a weight that is too heavy for your body to handle at the time. However, if you were to start lifting light weights and working your way up over time, your body would be able to handle the weights much better. The same goes for building up your financial strength. Start with small successes and recognize them along the way. They may seem insignificant in the grand scheme of things, but in the long run, they will make a huge difference.
Talk Openly About Money
Money is such a stigmatized topic, and we typically try to avoid speaking about it with others. For many reasons, it can be considered taboo. Many young adults may feel as though others have their finances all figured out. However, that is not typically the case. Most people are secretly confused or struggling to figure out their finances. It can be really beneficial to have open conversations with friends or colleagues about your financial struggles and goals. It is also helpful to discuss your experiences with others, such as how to manage your retirement contributions or find affordable recipes to cook at home.
So, break the silence.
This could be as simple as talking to a friend about your goals for your money. You may also consider having an open conversation with your colleagues about your money. For example, you might ask someone how they manage to put as much as they do into their retirement savings. You could also share some of your own money-saving tips with your coworkers. Even just sharing a cheap recipe for a meal that you like can be a great way to start a conversation.
Whether you are at work or at home with your family and friends, talk about money in a relaxed manner with the people you trust. Don’t go into details about your salary or the account balances, but talk about your financial goals and the problems you face trying to reach them. You might ask your colleague for advice on how to set up your retirement contributions. You might even share with your roommate a simple recipe for a meal that is within your budget. People tend to be secretive about their money because of the many social stereotypes surrounding it. But by sharing your money-related problems and goals with the people you trust, you can realize that everyone is in the same boat and that there is nothing to be ashamed of.
Focus on Control, Not Perfection
Nobody has perfect finances. There are times when you will overspend, fail to meet a savings goal, or make an impulse purchase that you regret later. Finances are imperfect, and focusing on perfection will only lead to frustration.
Being imperfect and able to recover from mistakes is key to financial confidence. By removing the expectation of being perfect and understanding that you will make mistakes along the way, you will have the tools and strength to recover and to grow from them.
Be generous to yourself, start somewhere, and make progress. It could be opening an online checking account in a matter of minutes. It could be reviewing your current accounts to have a better grasp of your finances. And it could be waiting 24 hours to make a non-essential purchase online to see if you really need it in the long run. Every step you take, no matter how small, will bring you closer to where you want to be financially and bring you financial security and freedom.
