Back to Basics – Financial Discipline

June 18, 2021
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Following the discussions in the last two articles, we come to probably the most important factor in achieving our financial goals – financial discipline. No matter how lofty our goals are or how well thought out our plans, if we do not have financial discipline then we may not attain the lifestyle we dream of. Many struggle with financial discipline because they think it is their money, they worked hard for it and they should be free to spend it how they like, even to the level of indulgence. That may be true, but should the “you of today” deprive the “you of tomorrow” of a better quality of life? The money is ours today and it would be ours tomorrow – together with the investment incomes that accrue. If we are prudent with money, saving and investing wisely, instead of spending on gadgets and perishables, the money invested would generate sufficient returns and we would be able to easily afford even better quality gadgets later.

We cannot master financial discipline without first learning delayed gratification.  Financial discipline is empowered by a focus on the future, otherwise, we would question why we need to “suffer”. We would live only for today and by default create a suboptimal future for ourselves. Most importantly, we would not achieve the goals that we set for ourselves. A student who sets a goal of graduating with first class does not spend her time like those who have not set goals. Similarly, we who have financial goals cannot afford to spend our income like those who have no goals.

To maintain financial discipline, we must keep ourselves motivated. Financial independence is liberating, but financial insufficiency is very limiting. A financially challenged person does not have choices. He cannot choose where to live, he is forced to live in certain neighborhoods because of his financial constraints. No matter how brilliant her daughter is, she cannot send her to Harvard University, where the youth’s brilliance would be further developed. Her entertainment choices are limited – she cannot visit the wonders of the world like the Great Pyramid of Gaza or the majestic Niagara Falls. She cannot afford the best medical services or even pay for the best health insurance packages. She may be forced to look for work after retirement because her monthly pension does not cover even her vital expenses. All these negative scenarios resulting from financial challenges should motivate us to be financially disciplined to create our desired future of financial independence.

We should set up structures that support financial discipline. Open a savings account without e-banking features. Fund the savings account through monthly payment standing orders on your salary account. You can easily set up standing orders yourself on your mobile banking app. A savings account is just a holding account to amass funds for more profitable investments, therefore you should set up direct debit instructions with the bank to sweep the account balance either into the account of your stockbroker or other investment broker once a certain amount is achieved. Personal finance management (PFM) apps also facilitate financial discipline. They not only help with financial planning and budgeting, but they also support the achievement of the objectives of the plans through reminders for savings and other investment actions, alerts when spending limits are about to be exceeded, and other measures that improve our prudence.

Some may need a change in lifestyle to achieve sustained financial discipline. This is not peculiar to financial management. Weight loss programmes, academic excellence, career promotions, etc. all demand lifestyle changes. Lifestyle changes related to financial discipline include reduction in eating out and buying fast foods – eat at home, pack lunch from the house, entertain at home; avoid shopping as a form of entertainment – no more going to the mall out of idleness; it results in spontaneous, unplanned, usually unnecessary spending. Spontaneous spending can also be initiated through peer pressure, a need to conform to your peers. The solution to this is to have another set of mates who can counter the negative influence.Find a mentor who would keep you accountable to your financial progress. Find a trusted friend that you can share details of financial transactions with, and you can motivate each other to attain financial prosperity. Join an investment society/ WhatsApp group or form one, so you can have a forum where people of like minds can come together to share tips, successes, warnings, and financial news.

Only through sustained financial discipline can we achieve our financial goals and create the future we desire. Keep motivating yourself to remain focused and disciplined. Happy investing.

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