investing
Why It Matters How You Pay Your Financial Advisor
Why does it matter how you pay your financial advisor? Read on to learn more.
Financial confidence plays a huge role in how you approach money-related decisions and how you follow through with actions.
When you think about managing money, “confidence” probably isn’t the first word that comes to mind, but maybe it should be. Financial confidence plays a huge role in how you approach money-related decisions and how you follow through with actions. Without it, even the smartest financial plans can fall apart. With it, you’re more likely to take action, stay on course, and adjust as needed when life changes.
What Is Financial Confidence And Why Is It Important?
Financial confidence is your belief in your ability to manage your money effectively, whether that means sticking to a budget, investing for retirement, or knowing when to ask for help. It’s not about knowing everything, but instead, it’s about feeling equipped to make informed decisions and take ownership of your financial future.
That confidence can affect how likely you are to set goals and follow through on them, as well as stay engaged in both the day-to-day and big-picture aspects of your finances. People with high financial confidence are more proactive about issues, more resilient when things go wrong, and more likely to seek out helpful resources when they need them.
That said, confidence has a flip side. Overconfidence can lead to risky decisions, not seeing the whole financial picture, or an unwillingness to seek guidance. Like any area of confidence, financial confidence is about balance.
What Factors Affect Financial Confidence?
It’s very common to make poor financial decisions, and it’s not something to berate yourself over. A recent study from Quicken found that 80% of people regret their financial decisions. That’s not because people are lazy or reckless; it’s simply that the financial world is complicated, clarity isn’t always easy to find, and your brain isn’t wired for financial decisions.
A few key factors can shape how confident you feel regarding your finances. For example, younger adults may feel less financially confident because they haven’t had as much financial experience yet. If you’ve never been taught how to budget, invest, or plan for the future, it’s easy to feel lost at any age. Previous successes or setbacks, like debt, job loss, poor investments, or smart savings habits, can also influence how capable you feel making financial decisions.
The world is full of financial advice, and much of it is contradictory. It’s hard to feel confident when you’re constantly second-guessing what’s “right.” When financial advice comes from all directions at all times, it can lead to confusion, overwhelm, and information overload. It can be difficult to seek out reputable sources and advisors if you don’t know what you’re trying to find.
How to Build Confidence in Your Financial Literacy
You don’t need to become a finance expert overnight. Building confidence starts with small, intentional steps that help you feel more in control.
Know where you stand
Start with a clear look at your financial situation. Review your income, your expenses, your debts, and your savings. Awareness is step one.
Envision your future
What are you working toward? Be specific. Instead of “retire comfortably,” try “retire at 65 with $100K in annual after-tax income.” Instead of “save for a house,” try “save $200K for a beach home within three years.” The clearer your goals, the easier it is to chart a course, measure your progress, and understand how your financial decisions will get you there.
Take action
Confidence grows with action. Create a budget that aligns with your goals. Automate savings. Explore investing. Reflect on why you make the decisions you do and explore your underlying motivations. The more you engage, the more empowered you’ll feel.
Embrace learning
Use online tools, free financial literacy courses, podcasts, videos, and trusted websites to build your financial knowledge at your own pace. You don’t have to learn everything, but learning a little gives you a big edge.
Get professional support
A reputable financial advisor can bring clarity, confidence, and direction. Having financial advisors who take a holistic approach, such as at PFW Advisors, will help align your money decisions with your life goals.
Hiring a Financial Advisor: The Best Financial Decision You Can Make
Many different people call themselves financial advisors. Some are excellent guides. Others are primarily salespeople, not held to fiduciary standards. Many earn commissions by selling certain products and aren’t always acting as a fiduciary. That’s why finding the right advisor (one who puts your goals first) is crucial. Before moving forward with a financial advisor, it’s imperative to ensure there is no conflict of interest and that they are always acting in your best interest.
A trustworthy advisor will help you:
- Define specific goals
- Make decisions with your full financial picture in mind
- Avoid products that don’t serve you
- Understand each recommendation they make and why
- Explain each recommendation to you clearly, to the point that you can explain it to someone else
If you don’t understand the “why” behind a financial recommendation, that’s a red flag. When advice feels confusing or overly complicated, it’s worth pressing pause. Clarity builds confidence. Confusion creates doubt. Working with someone who takes time to explain, listens to your concerns, and tailors strategies to your life can transform your financial experience.
Most people don’t feel financially confident, and most have made financial decisions they regret. But you don’t have to stay stuck in that pattern. You can start making more confident choices today by clarifying your goals, getting engaged, learning more, and seeking guidance from a trusted advisor when needed.
