If you browse the internet, you've probably seen a number of articles on how to increase your confidence. They might discuss habits that confident people carry, or what steps you can take to increase your own level of confidence. But have you ever considered that you may be overconfident?

For instance, have you thought of taking on a challenge, only to realize you didn't know how hard it would be? Studies have shown that overestimating your ability levels can happen in a number of areas, from studying, to practicing a skill, to playing sports.

While we normally see boosting someone's confidence as a good thing, having too much of it can have a negative effect. Being overconfident can lead to losing money from poor investing decisions, losing the trust of people who rely on you, or wasting time on an idea that'll never work.

The problem is the less you know about something, the more likely it is that you won't realize your skill level until you've made a mistake or faced an obstacle.

Researcher David Dunning calls this problem "the anosognosia of everyday life," which refers to a condition where the person who suffers from a disability is unaware of it. In his research, Dunning found that we tend to be unaware of our skill level, and end up misjudging how our competence relates to the task at hand.

Dunning goes on to say, "If you're incompetent, you can't know you're incompetent...[t]he skills you need to produce a right answer are exactly the skills you need to recognize what a right answer is."

Seems like a catch-22, doesn't it?

If we don't realize we lack the skill or knowledge, but believe we do, how can we improve ourselves while avoiding disasters?

I've found that there are three things you can do to keep your confidence levels in check:

1. Get periodic feedback.

In the beginning, you're in the dark about the process, and as you become better at a skill, you can take foolish mistakes from thinking you know everything.

Having an accountability partner or someone you respect give you feedback periodically keeps your confidence levels in balance.

Or, you can also play devil's advocate to your own opinions. If something sounds like a good idea, consider any weaknesses in the decision and the potential negative consequences of going through with it.

2. Create a buffer.

How often do you start a task that you think will only take up half an hour, only for it to end up consuming most of your day? If you're like me, this probably happens pretty often.

When you have limited time to complete a task, it's good to schedule in extra time in case anything unexpected happens. Buffers can be used for more than just time, though. They can also be used for planning, budgeting and making investment decisions.

3. Brainstorm what you don't know.

Whenever you start on a goal or embark on a journey, it's easy to feel excited and imagine how things will turn out. While these feelings can inspire us to pursue new challenges, reality strikes and those dreams can vanish into thin air.

For example, most people would probably be ecstatic about winning an Olympic gold medal. But very few people would be willing to endure the pain and effort needed to get there.

So if you want to do something, think about what steps and adjustments you would need to make. It doesn't mean that you need to plan for them right away. But doing so helps you get a more realistic picture of what to expect and whether to go through with something.

Confidence is a delicate balance

As we've seen, it's hard for us to recognize our skill level at first, and by the time we realize it, there can be some serious consequences from our lack of awareness.

Acknowledging the issue of overconfidence is the first step to battling it. Recognizing that we might not know that much after all can help us get a better perspective on our situation and what steps to take in the future.

Confidence is like a balance. Too much of it, and you risk making poor decisions that have unwanted consequences. Too little, and you never risk anything at all.

But if we plan for unexpected events and approach our decisions with cautious optimism, we can move ahead with just the right dose to make progress.