How to change your mindset and other practical steps to boost your financial confidence

The latest Sanlam Financial Confidence Index found that younger South Africans (2o to 43) had the highest financial self-determination and were more financially resilient.

International behavioural science specialist Dr Mavis Mazhura explains how your emotions and mindset can affect your financial goals – and what you can do about it.

Identify your emotional patterns. These are behaviours or mindsets that are learnt from a young age. The good news is that you can unlearn them. “Recognising the backstory and how it has contributed to the emotional pattern you currently have is important because it allows you to go back and be able to retell the story to your adult self, so that it releases its grip on you,” she says.

Be conscious of your community. Motivational speaker Jim Rohn says we are the average of the five people we spend the most time with, and Mazhura says the people you spend time with have an emotional input into your behaviour. “A bigger part of financial resilience is really around community, around the people you have to rally behind you towards your financial goals or to support you when you have a financial setback.”

Take note of the importance of boundaries and goals. When you leave your emotions unguarded and unguided, you end up with emotional flooding. This refers to instances where you react disproportionately to an event because you have been emotionally flooded. Goal setting gives you a practical way to channel your emotions towards positive results.

Don’t be afraid to lean on a coach. Just as an athlete knows what their training routine is, but relies on a coach to push them a little harder, to encourage them when they falter and to keep them focused, a financial planner helps you stay on track with your financial plan.

Change your mindset. There is a great deal of talk currently about a “cost-of-living crisis”. However, using the word ‘crisis' implies that this is something that is going to revert to “normal”.

“The reality is that even if interest rates and/or inflation go down, the cost of living is unlikely to dramatically improve suddenly,” Mazhura observes. She says it is far more productive to approach it as the “new normal” and think of ways to adapt, such as creating multiple incomes.

These are all practical steps to improve your financial confidence and, ultimately, the decisions you make around managing your money. Often investors are not aware of the extent to which their emotions affect their investment.

In the Momentum 2023 Sci-Fi Report, Ryan Murphy, global head of behavioural insights for US financial services firm Morningstar, highlights the importance of a financial planner. He says investors reach out to financial planners because they lack the confidence that they have the skills to reach their financial goals, or they lack knowledge regarding financial skills.

Financial planners can help by explaining the financial plan, motivating you to stick to the plan and giving you guidance on what to do, or what not to do, in certain financial situations.

Behaviour tax: when you let your emotions dictate your choices

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.