You’ve likely heard the phrase ‘confidence is key’ and certainly, in the modern environment it’s easy to think that being confident in your own capabilities is the single most important key to success in life. However, a recent study by Aviva indicates that financial confidence may actually be costly to those who have it, negatively impacting not only the financial decisions they take but their ability to recognise when mistakes are made.
But back to that old adage – ‘confidence is key’. What you might not realise is that the full story behind it involved several global surveys which indicated that confidence was key to ‘lifelong learning’ and that ‘hands-on lessons’ supported global success. In other words, confidence alone won’t get you very far without the expertise to back it up. Confidence is a good starting point, but it’s just that – a starting point.
How does that relate to the Aviva Survey? Well, nearly half those surveyed who had identified themselves as ‘confident’ in their financial decisions incorrectly believed that it was false that pensions attract tax relief, and almost a quarter did not apparently know that the level of state pension could be affected by the amount of national insurance paid.
Furthermore, 70% of those identifying as confident said that they would rather ‘play it safe’ and leave cash in a savings account than invest. FCA research indicates that £10,000 saved in cash in 2008 would be worth £11,720 by 2018, compared with the same amount being invested over the same period being worth £21,905.
What this all means is that misplaced confidence is causing people to make decisions based on false assumptions – decisions which cost them significant sums of money, and which will therefore directly impact their retirement plans, if they have any.
Confidence is a good start, but if you want to really unlock your potential in any walk of life, you need to take that start and combine it with education. Few of us have the time or resource to become experts in everything, which means seeking the advice and assistance of those who are. If you need surgery, you don’t think a can-do attitude and a hacksaw will suffice, so it makes no sense why people think they can take control of their financial destiny through sheer force of positive thought.
Speaking to a financial adviser will allow you to make sensible, focused decisions. Your confidence might tell you where you want to go, but their expertise will help you get there in the most efficient way possible.