I’m sure you have heard of ‘Financial Literacy’. Financial literacy is the act of learning more about finance, accounting, tax and how the economy works. Granted, you don’t need to know EVERYTHING there is to know about all of those things, but you should at least know about the things that matter to you.
When I write about financial literacy – I like to write about it from the point of view of small business owners. Which is why I write about things like taxes, accounting fundamentals and tips on how to run a business.
Which is all good and fine.
But do you know what is more important than Financial Literacy?
Financial Confidence.
The main difference between Financial Literacy and Financial Confidence is that Financial Literacy is a means to an end – Financial Confidence IS that end.
Financial literacy is reading a book on riding a bicycle. Financial confidence is riding that bicycle and feeling confident in your skills in riding the bicycle.
There are many ways to build financial Literacy, if you are a regular reader of this blog – you’re probably more financially literate than the average person. But to build Financial Confidence, we need to start from within – you see, being Financially confident is all about mindset.
What do I mean by mindset?
Ok, let’s take the example of the recent COVID-19 crisis.
There is a general feeling of fear and anxiety about the future of the economy. Everyone is worried that their jobs might not be secure and many more are concerned about paying their bills and servicing their mortgage.
In short, people are feeling Financially Insecure.
And because they are financially insecure, they make hasty decisions.
Decisions like cashing out their superannuations, pulling out of their investment funds, or laying off employees in their business.
These decisions may seem good at the time, but they are detrimental in the long run.
These short-term decisions are driven by a mindset that talks about scarcity, that feeds on fear and that is consumed by doom and gloom.
So what is the alternative?
You see, a Financially Confident person would know that the COVID-19 crisis is just another occurrence that shakes up the world economy and that, over time, the cyclical nature of the global economy means that things will return to a reasonable level.
They would have put money away for a rainy day and they would keep their money in their investments – because they have a long-term financial plan. They will still feel fear, but they have the right mindset to override that fear and keep their eyes on their long-term financial goals.
They don’t react to situations, they take their time to carefully plan out their next move and think about how they can make the best of the current economic climate.
The decisions they make are driven by a mindset that talks about abundance, that grows on optimism and surrounds itself with positivity and the promise of a brighter future.
With the right mindset, we are able to cut through all the negativity in the media. We can filter out all the scaremongering news we read. We can get to what is really important to us and our financial goals.
Armed with this mindset, we can then start building upon the foundation we have laid through financial literacy to better plan and face the future. There is no need to react to the current economic crisis, but instead we need to take stock of our personal situation and plan what our next steps will be. In all likelihood, we might even find that we need to make little to no changes to our plan, because we are financially confident of where we are and where we want to be.
Tomorrow me and Sonnie Bailey of Wealth & Risk NZ will be holding a free webinar on planning for the future in the midst of the COVID-19 crisis. Join us as we talk about how you can remain focused on your financial goals during these times and ultimately build up your Financial Confidence to face the future!
Click here to register and we’ll see you tomorrow!
