How to become more confident in managing your finances

The pandemic has left many of us recognising that we need to reset, re-evaluate and take back control of our finances, whether that's because money is now tighter or because lockdowns and working from home have actually left us with extra savings to manage or invest.

There are, of course, many resources out there that can help you with this: online calculators, guides and toolkits; potentially your bank or accountant; even a financial adviser if you have access to one.

The difficulty here, however, is what we might term 'the horse to water' argument. Financial advice, education and tools are, more often than not, based on the premise that people a) take an active interest in financial management, b) feel confident about making financial decisions, and c) are rational about finances and money.

The reality, as money coach Emma Maslin has highlighted in a 'vlog', or video blog, is sadly often rather different. You can give people all the financial tools and education you like but, if they don't feel confident or motivated to use them, chances are their bad financial behaviours will not change. As she explains: "People often feel a lack of confidence gets in way managing their finances. They feel money is controlling them, rather than them being in control of their money."

Our emotional connection, or disconnection, to money can often be something we can trace back all the way to our childhood and formative experiences growing up. If your parents were savers or squanderers, for example, that may colour how you, in turn, 'value' money, how you spend or save, budget or plan, irrespective of whatever brochure, seminar, financial tool or sensible advice comes your way.

A good example of an emotional rather than rational response to money is feeling shame or embarrassment about your financial situation, for whatever reason, and so putting your head in the sand and refusing to engage with money problems.

"If as an adult you have bad habits or negatives values or attitudes to do with money, or conversely, good habits and positive attitudes, these can typically be traced back to those experiences you had around money in your formative years," Emma explains.

Imagine a child encouraged to save their pocket money by their parents, she highlights. "But they come to spend that money and find the piggy bank empty. Mum explains that she needed the money for groceries and she is going to pay it back tomorrow. But what meaning has the child given that experience?

"Well, in the eyes of that child, they see money as something that can easily be taken away from them. So, as an adult, they may never save money and instead spend it as soon as it is paid to them, out of fear that if they don’t spend it somebody else will. This becomes their 'money story'.

"That example highlights why two siblings growing up in the same family can end up with entirely different money stories and might not view money in the same way as adults. Our money personality is totally unique because none of us experiences exactly the same thing growing up.

"As we go through life, the sum of all these experiences we encounter combine and develop our automatic habits and our reactions - our attitudes, feelings and thoughts - about money. All of those things we see, experience, or are taught, they all result in habits, behaviours, feelings around money that then get stored in the sub-conscious part of our brain," Emma adds.

"This feeling of lack of control can manifest as panic, inaction, fear, secrecy. It is also really common to see people simply bury their heads in the sand when they feel out of control. They go into denial," Emma continues.

All this, in turn, can create feelings of financial stress, worry and anxiety. "When we are under financial stress, this can spill over into how we manage our relationships and jobs and our wider lives. On the flipside, when we do have control it fosters really positive feelings that also filter out into other areas of our lives," Emma emphasises

"A key part of the transformation to a feeling of good financial wellbeing therefore comes with acknowledging the current relationship you have with money and learning to create a great relationship with it; one where you feel in control and positive. A core difference between those people who have a great relationship with money and those who don't, is what is going on inside their brains," she adds.

How, then, to break this cycle? How can you take back control of finances from, well, yourself - or at least from your emotional, irrational, in-denial subconscious self?

The first thing is simply to recognise this very point: that the bad decisions you've been making about money (or simply the fact you've not been making decisions at all) are a) part and parcel of your 'money story', as highlighted earlier, and b) that it is possible to change this narrative.

"Uncovering your own money story and understanding why you believe certain things and behave in a particular way is so valuable," argues Emma. "If you want to be able to change behaviours you have had as an adult, which aren't making you feel good or are putting you in a situation where you feel out of control with your money, exploring your money story is essential," she adds.

She suggests asking of yourself the following questions: growing up, what did you hear around or about money; what were you taught about money; what did you see around you to do with money; what did you experience?

"Often when we do this exercise, when we answer those questions, it becomes really easy to see why we have certain patterns of behaviour as an adult. Where a child may have seen their parents arguing about money when they were younger; maybe money was tight.

"They then associate money with feelings of sadness and worry and, as a consequence, they grow up to bury their head in the sand when it comes to having those difficult money conversations," Emma argues.

"They want to avoid any confrontation that they associate with money. If you start to pay attention to what your inner voice says to you in situations where money is a factor, you'll uncover your own money story and beliefs. Your beliefs drive your behaviours. Your behaviours determine your actions. And your actions influence your results," she adds.

"We need to start with our beliefs. Uncovering any beliefs that you may have but which might be preventing you having a really great relationship with your finances is such an important exercise when it comes to better financial health and wellbeing. Especially when you aren't consciously aware you have the belief in the first place," Emma says.

Therefore, resetting your finances is as much about resetting your mental and emotional attitudes to money as it is about looking at bank balances or opening a new savings account, even though both of those can be good ideas.

Spend some time reframing those beliefs and you will be able to place new behaviours, new habits, around your finances, all of which will ultimately result in entirely different financial outcomes.

Nic Paton is one of the country's foremost journalists on workplace health, safety and wellbeing, and is editor of Occupational Health & Wellbeing magazine. He also regularly writes on the health and employee benefits and health insurance markets.