Do you tend to equate money with stress? If so, you’re not alone. The American Psychological Association’s latest Stress in America survey found that 72% of Americans have felt financial stress recently. When you feel anxiety related to money, it can be difficult to talk openly about it, or even to seek help. In my experience, much of this comes down to a lack of financial confidence – and it can make you feel paralyzed when it comes to financial decision-making. Luckily, there are steps you can take right now to increase your own financial confidence.

In this article, we’ll review six steps you can take to feel more empowered and confident in money matters and begin to overcome your financial stress and anxiety.

Step 1: Understand Your Spending

Too many people fail to focus on their spending, meaning it’s very easy to spend more than you’re earning. Obviously, this has long-term financial implications, so it’s important to take a good, hard look at the numbers and take charge of your spending habits. Start by focusing on the difference between critical spending and nice-to-have spending. Critical spending refers to the things you need to live, such as your mortgage payment, health insurance, and utility bills. Nice-to-haves, on the other hand, are not necessary for your day-to-day living. This group of expenses includes things like this season’s jacket, a vacation, or a phone upgrade. When you begin to look closely at your spending, you may be surprised to see just how much you’re spending on nice-to-haves – and identify exactly where you can cut back, if needed.

Step 2: Understand Your Debt

When it comes to debt, things can be a bit tricky because there is good debt and there is bad debt. As a general rule, good debt facilitates a goal, like buying a house or taking out loans to attend college. Conversely, bad debt typically doesn’t support a life goal, and it often has a high-interest rate. The most common bad debt in the U.S. is credit card debt, where paying just the minimum amount – as many people do – means your money is going straight toward interest and not making a dent in how much you truly owe. If you’re stuck in an unhealthy bad debt cycle, make a plan to pay it off as soon as possible. This is crucial to getting yourself onto firmer financial footing and having a debt reduction strategy will make you feel much more financially confident.

SEE ALSO: Four Mental Barriers that Stall Your Financial Success

Step 3: Build Your Emergency Fund

The year 2020 reminded us all that life brings many ups, downs, and surprises. These things are inevitable, even when we’re not facing a global pandemic. The thing we can control, however, is how we handle financial surprises when they come along. What if a family member becomes sick and you have to take a leave of absence from work or absorb the financial costs of caring for them? What happens if you or your spouse lose a job? Having an emergency fund is critical to navigating these transitional periods in life, and I recommend having three to six months of living expenses stored away. This can be difficult to achieve, especially in the case of a one-income household. However, keep in mind that small progress is still progress – start with setting aside just one or two paychecks and build from there. Any amount you can save for a rainy day will lessen the stress you feel when an unexpected expense arises.

Step 4: Save Early

When you start saving early, setting up an emergency fund is far less daunting. When you first start having an income, or when you get your first “real” job, try to save 10-15% of each paycheck. This is great for building your emergency fund, but it also helps you establish a habit of saving. When you make your future part of your present, you’re “paying yourself first” and building confidence in your financial future.

Step 5: Learn the Lingo

Are you letting financial jargon scare you away from taking charge of your finances? This is a roadblock for many people, but it’s possible to overcome it. Financial terms are confusing, yes, but with time and patience, the terminology becomes much more approachable. Learning how to “speak finance” is like learning a new language. You won’t feel confident at first, but be patient with yourself, stick with it, and speak up when you don’t understand something. For more on this topic, check out Episode 9 of my Flourish Financially Challenge Podcast: Learning the Lingo.

SEE ALSO: Families and Finance: Communication is Key

Step 6: Avoid Lifestyle Creep

Lifestyle creep is a common occurrence, and it happens when you increase your spending as your income increases, rather than choosing to save some of that additional income. It happens for three reasons: failing to have a plan for your additional income, living too much for today, neglecting to plan for the future, and comparing yourself to others. The comparison trap is particularly dangerous. There are financial unknowns happening behind the scenes for every family, so it’s impossible to know whether your friends and neighbors can really afford whatever it is they’re buying. They may be deeply in debt or even facing foreclosure. The point is that you never know what others can truly afford or why they can afford it, so don’t get caught up in keeping up with the Joneses.

Letting Go of Your Fears and Building Financial Confidence

When you take proactive steps toward building your financial confidence, you can begin to let go of some of the fears that are holding you back from making financial decisions – and from achieving your dreams. Tackle the six steps listed above one by one, and you’ll soon find yourself feeling less financial stress and more empowered to secure your own financial future.

In my book, Flourish Financially: Values, Transitions, and Big Conversations, I share four additional steps toward building your financial confidence. Learn more here, or get your copy today on Amazon.