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Self-efficacy is your belief in your ability to take actions to achieve and goal and have those actions pay off. It has a wide variety of positive outcomes including helping with motivation, problem-solving and reducing some of the psychological barriers to good money management that we’ve discussed in previous episodes.

The original research was done by Albert Bandura at Stanford University. You can read more about self-efficacy and how to cultivate it here.

Alex also mentions Martin Seligman’s work on Learned Optimism, you can find his book here.

We love this quote from Bandura

Self-belief does not necessarily ensure success, but self-disbelief assuredly spawns failure.

Our tips:

Do it yourself
1. Practice! Try and remember that it’s normal to fail at first. Change one financial habit at a time. Congratulate yourself every time you succeed.
2. Try taking a small simple step towards the thing. Celebrate your successes.
3. Recall times when you have accomplished something difficult (anything). Tell yourself “I did that, so I can do this.”
4. Re-frame all the times you bounced back from a failure as a success. You survived! You kept going! You are stronger than you know. Now build on that.
5. Look for the things you did right, even when they didn’t work out. (e.g. saving for a fun goal then having the savings wiped out by an emergency expense. This is actually a positive outcome, you didn’t have to borrow for the emergency!)
Observe your peers
1. Watch people around you, ideally those who you relate to, accomplish the thing you are attempting. Do you have friends who are great with money? Can you talk to them about how they do it?
2. Talk to people you know who may have experienced something similar and overcome it. Do you know anyone who has got out of debt?
3. This is why peer-support models (e.g. Money A and E) are so effective.
N.B. We all need to talk more about money!
Learn from role models
1. Look to role models to show you the way.
2. Especially look for stories of people you admire overcoming challenges. Learn about how they did that. (There are literally hundreds of people blogging their journey out of debt.)
Persuasion
1. Get a pep talk. Have someone tell you that you can! (This could be you!) How well this works depends on how much you trust that person.
2. When others show confidence in you it builds your self-efficacy. This doesn’t have to be verbal, actions speak louder than words here. Can you think of ways to gather proof that others believe in you?
Visualisation/Imagination
1. Visualise/imagine success, in detail. Including visualising yourself doing the things it would take to be successful as well as the outcome. Put yourself in the picture.