Which comes first, confidence or success? I believe that in most facets of life, confidence is a prerequisite for success. This is true whether you are a business executive, athlete, musician, teacher, or any other profession. Of course, there is a virtuous cycle where success reinforces confidence, but it has to begin with confidence in the first place.
If you are introverted, like me, or have been raised to be humble, outwardly confident individuals may make you uncomfortable or even irritate you. While no one likes arrogance, it is often the case that we go too far to the other extreme. Our humility may mask a self-limiting belief system where we subconsciously sabotage ourselves if we don’t believe that we deserve to succeed and become financially independent or yes, even, wealthy.
Confidence doesn’t have anything to do with knowledge, skill, or experience. But as a behavioral attribute, it does have a great deal of impact on initiative, willingness to do more, and fortitude to endure the inevitable ups and downs that come with being an investor.
I believe that if you are more confident as an investor, you will be more likely to accomplish your financial goals. This doesn’t mean that you have to invest more aggressively, nor does it imply that you will have any ability to predict what the market will do this week, month, or year.
Fortunately, you can improve your confidence, and all of us can use a boost from time to time to refresh and recharge. For many people, their lack of confidence in their ability to manage their finances results in procrastination. They know they need to get to work, but always find a reason to delay dealing with this “unpleasant” business. Change this attitude, change your life. Here are five steps:
1) Plan. Having a game plan gives you something to believe in. You’ve done your homework and are prepared. When you create a financial plan, you are addressing the unanswered questions, worries, and guilt you have about money today.
2) Focus on the process, not the outcome. You cannot control what the market will do this year. Luckily, it doesn’t actually matter. You are investing for 20, 30, or more years. Save as much as you can today and invest in a thoroughly diversified asset allocation. Focus on what you can control and good things will unfold in due time.
3) For long-term results, act today. A marathon is completed the same way as a 5K: one step at a time. The strategy may be more complex, but when the finish line is very far away, concentrate instead on a closer goal. For example, can you increase your saving from $500 to $1,000 this month? Knocking down small goals is a great confidence booster, especially when the payoff of your long-term goal may not be seen for years or decades.
4) Visualize. Create a clear goal, write it down, and keep it a place you will see daily. Ok, I know visualization sounds like some New Age nonsense of bending the universe to your will. Instead, think of it as creating a focus on what is important. That constant reminder creates repetition, which becomes a habit, and good habits produce results over time. Believe in your goals, believe in yourself.
5) Be positive. Find reasons to do something, not reasons to not do it. It’s easy to find fault with the market as too risky. People who tell me they lost a ton of money in the market may be correct, but they’re ignoring all the good years. Actually, the S&P 500 Index has returned a bit over 7% a year over the past 10 years (through 4/15/2016). That’s nearly a double, not a loss. If you didn’t get that return, call me so I can introduce you to index funds. But only seeing the market as a way to lose money is factually incorrect, and that attitude will hold you back. If, instead, you can think of volatility as opportunity, then you will actually be happy when there is a drop in the market.
I write about the techniques of financial planning every week, but my telling you how to do it won’t accomplish anything unless you are passionate about why you should do it. When you can answer “why” you need to plan and invest, then you will be more willing to spend the time, effort, and money to accomplish your goals. If you want to be successful, boost your confidence by thinking successful thoughts.