Building Money Confidence and Financial Well-being

Aleka Gutzmore shares insights designed to improve your money management skills and reduce financial stress

Money confidence and financial well-being exist side by side, and if an individual lacks in any of these two qualities, it can impact their finances and psyche.

Money confidence is not high. According to research conducted by the Financial Conduct Authority (FCA), just 28% of UK adults said they had low confidence in managing their money and 17.7 million UK adults (34%) had poor or low levels of numeracy involving financial concepts. Low money confidence is more prevalent in financially vulnerable households, young adults, particularly women, BAME groups, the unemployed and private renters.

What is Financial Confidence?
There is no actual definition about what it means to have financial ‘confidence,’ as it can vary at different times for many reasons. However,, creators of ‘The Measures of Financial Confidence’ document, indicate that financial confidence centres around three key concepts:

  • Self-efficacy: whether people believe they can make effective financial decisions
  • Self-assurance: whether people believe in themselves, to act and follow through on those decisions
  • Self-determination: whether people have the intention and willpower to take control of their finances

What we do know, is that confidence impacts behaviour. Lack of financial confidence and low numeracy can lead to increased risk-taking, exposure to money sharks and fraud, poor decision-making, and stress.

Impact of increased money stress
The vast majority of people worry about their financial situation daily. Many are sick to their stomach, thinking about how they will manage or pay essential expenses in the future. Money stress is known to cause headaches, arguments with loved ones, and anxiety. Persistent financial stress can cause:

  • Depression
  • Digestive problems
  • Heart disease
  • Sleep problems
  • Weight gain
  • Memory and concentration difficulties

There are simple and proven steps an individual can take to boost their financial confidence, alleviate stress, and manage their finances effectively.

This process usually entails a planned approach to reducing expenses, shifting your mindset, and finding ways to earn more income. It’s also about empowering yourself to learn more about where your money goes and how to leverage it.

Here are some tips to help you get started:

  1. Establish your financial priorities. These will help you focus your efforts, provide a framework for your actions, and help you set specific, measurable, achievable and realistic goals.
  2. Budgets do help. Start with your essential monthly expenditure and work up from there by adding saving and investment goals and implementing regular reviews.
  3. Embrace a minimalist lifestyle.  Learning to live with what you need and applying gratitude can lead to making ethical financial decisions that have positive effects outside of your financial affairs and towards others.
  4. Automate your finances. Set your regular bill payments to direct debits to avoid late or missing payments.
  5. Create an emergency savings pot. Aim to save the equivalent of three months of your regular essential bills, and work on increasing this to 12 months. Add some personal protection to ensure long-term stability in the event of an accident or sickness, which may reduce your income and put your lifestyle and savings at risk.
  6. Get 1-to-1 support from a financial advisor/mentor/coach. You only know what you know. Gaining support and knowledge from reputable sources will eliminate stress. “A problem shared is a problem solved.” Adding a supportive layer of accountability and encouragement is key to building your confidence.

There is no shame in getting assistance when you have financial worries, as the data shows 1 in 4 UK residents have admitted to having low money confidence. Once you identify an issue or desire to improve your financial position or capability, you must make a start and don’t go it alone.

Your financial well-being will impact all areas of your life – whether positively and negatively – depending on your approach and attitude. Finding the right balance and building financial confidence and well-being take commitment.

I would encourage you to talk to advisors and organisations that have tools to assist you, and embrace the changes needed. It will be an investment that will pay dividends in more areas that money can’t buy. Aleka Gutzmore is a UK-based financial advisor and creator of the Financial HUG™ Financial Life Coaching programme. She specialises in property funding and protection and was awarded the Mortgage Intermediary DEI Trailblazer in 2023.

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