If you think coping with finances is overwhelming, you’re not alone. A recent study found that nearly 4 in 10 (37%) people avoid dealing with their finances, and more than 3 out of 4 feel stressed and concerned. In the new study, “Path to Prosperity: The Guardian Study of Finances and Emotional Confidence™” conducted by Guardian Life Insurance of America, two notable findings stand out: 1) Financial confidence is connected to emotional confidence, and 2) having higher income does not guarantee financial confidence. Instead, adopting certain behaviors and habits around finances helps people become more financially and emotionally confident. Better yet, you can learn these habits to help improve your own financial confidence, no matter your income level.
Here are 5 tips from the study to help improve your financial and emotional confidence.
1. Live within your means
Creating a budget that helps you save rather than living paycheck-to-paycheck is one key to financial confidence. Among the groups identified by the survey as the most financially confident, termed “Confident Planners,” 87% said they get more satisfaction from saving and investing extra money than spending it. Developing a saving habit by spending less than you earn will help create a feeling of confidence over time. Knowing you’ve saved and invested some of your income can help you feel confident you can face difficulties – or enjoy a more protected retirement.
2. Educate yourself about finances
Another important element for developing confidence is knowledge. Fortunately, it’s never been easier to find resources to help you become more educated about financial concepts and strategies. In the survey, those who feel more financially secure have a plan – and having a plan relies on knowledge. The Confident Planners group reported a greater understanding of financial concepts such as aspects of retirement planning, how to receive full Social Security benefits, insurance needs, investments and annuities.
3. Create a written long-term strategy
Applying your financial know-how to develop a long-term strategy – in writing – is another key component for confidence. The least confident group surveyed, termed “Day-to-Day Decision Makers,” tend to lack a strong financial plan, focusing instead on day-to-day demands. This group is overwhelmed with daily stress and finances and are most likely to panic when investments hit a market dip. Without a long-term plan, you are unlikely to feel confident about your ability to cope with unexpected financial stresses, much less being ready for major transitions like retirement. Having a written plan allows you to view your strategy and assess your progress toward your goals. In the survey, over half (51%) rate having guaranteed income in retirement as a top priority, but only 33% make the effort to be sure their financial expectations are realistic and achievable. Creating a long-term plan can help you achieve these goals.
4. Strike a balance between risk and protection
Any financial investment involves risk. Being able to avoid taking on too much risk for your situation can help you feel more confident. But how much risk is too much? That depends largely on your unique situation, including your income, age, financial obligations and family needs. One vital risk strategy involves diversifying your investments. While nearly half (45%) of those surveyed were interested in protecting their family financially if they die or are unable to work, only 25% believe they need a thoughtful blend of insurance and investments to be both safe and successful. One way to help protect against risk is to ensure you have sufficient savings, investments and insurance to protect your family’s needs.
5. Consult a financial professional
The most confident people surveyed also work with a financial professional to help them develop an achievable long-term plan that balances risk appropriately for their circumstances. Individuals who work with a financial professional – no matter what their income level – also tend to have a written financial plan, leading to increased savings and a higher level of confidence. A financial professional can help you create a solid long-term plan to help protect your income, your future and the interests of your loved ones.
“The study shows that income is not the sole driver of confidence,” said Michael Ferik, Head of Individual Markets at Guardian. “The findings reinforce the need to pair behaviors with long-term planning to set a strong foundation linked to both financial and emotional confidence.”
Adopting these habits can help you increase your emotional and financial confidence moving forward, helping you feel better prepared for whatever the future holds. To learn more about the Guardian study, visit: https://www.guardianlife.com/reports/financial-emotional-confidence. (BPT) –