How to develop financial discipline

Making money is vital, but regardless of your income level, financial discipline is one of the most crucial financial skills you need to be financially secure. The good news is that you can develop financial discipline and don’t have to give up on your ideal lifestyle or go hungry to maintain it.

To be financially disciplined, you must be an effective planner, a compulsive saver, and a wise spender.

Whether you’re just starting to practice discipline or are attempting to maintain it, the advice in this article is ideal for everyone. So keep reading if you’re interested in gaining control of your finances and attaining financial discipline. 

1. Ascertain your current financial status

Being aware of your situation is the first step towards achieving financial discipline. You should be as informed as possible about your finances, including where it is coming from, where it is going, and how much you are worth.

To do this, log all of your revenue (from side gigs to wages) and then classify all of your out-of-pocket costs (from rent to “enjoyment funds”). By doing this, you’ll be able to see everything that’s coming in and leaving.

This data may be entered into a spreadsheet, a piece of paper, or your notes app. Subtracting your total liabilities (debts) from your total assets (savings, investments, and property) is the next stage in calculating your net worth. This provides a crude, but generally accurate, picture of your financial situation.

With this information, you will know whether you are managing your finances well or not, and if there are areas you can improve on. Above all, don’t be scared to acknowledge the consequences of prior financial ignorance. You’ll discover focused answers more quickly the sooner you recognize the issue. Acknowledging your financial condition, regardless of how bad it is, can help you make better decisions. 

2. Establish financial objectives

Using a short-, mid-, and long-term goal framework and evaluating your discipline with achieving these can help you apply strategy. An example of a short-term objective is a monthly savings target. Making these objectives clear and reachable will serve as a helpful reminder and source of inspiration.

A good financial goal is:

• Particular: What specific goals do you have in mind? It can be to start investing, pay off debt, accumulate a sizeable emergency fund, become financially independent, or anything in between. Don’t be evasive; set measurable objectives. You will be more successful if you have a particular object in mind. For example, it is easier to save when you need money to buy a new car than when you just want to save money.  
• Quantifiable: Use hard data to monitor your progress toward your objective. Thus, stating your objective like, “I want to save ₦10,000,000 for a new car,” is preferable since it makes the goal quantifiable by accounting for the car’s real cost. 
• Realistic: Based on your income and spending, set reachable and realistic objectives. Saying, for instance, that you wish to save ₦10,000,000 for a car when your monthly income is ₦100,000 would not be realistic.
• Essential: Select objectives in line with your priorities and values. For instance, if where you live far from your home and you spend a considerable amount every month on transport, not to mention the inconvenience, then it is more important to save money for a car than for a house. On the other hand, if you work remotely and hardly leave your house, then saving for a new home will be much more sensible than a car.
• Time-limited: Establish a deadline to instill motivation and a feeling of urgency. Declaring your goal in concrete terms—”I want to get a car in two years”—allows you to create a schedule and stick to it. Put your goal’s precise description and the deadline for completion in writing. Then specify the precise steps you must perform daily. Make these motions as tiny and as frequent as possible. Smaller everyday actions are preferable to bigger monthly ones. 

3. Create a budget 

It’s time to make a budget now that you have a goal—or many objectives. Establishing a budget entails organizing your income and expenses into the best possible structure and, of course, having the self-control to stick to it. Your budget serves as your financial roadmap and facilitates the effective distribution of your revenue. 

Use the 50/30/20 rule to help you organize your finances if you’re not sure where to begin. Set aside 50% of your income for necessities, 30% for desires, and 20% for savings.

You may, of course, experiment with various budgeting techniques, such as envelope budgeting. This method entails dividing up the money into several groups for various costs. Concentrating on and controlling spending within each area, aids in the promotion of disciplined spending.

The following advice will help you better adhere to your budget:

• Make tracking your expenses easy by putting them in an Excel spreadsheet, for example. You must have your money close at hand and in your thoughts.
• Determine which of your previous month’s costs, including dining out and pointless memberships, you can reduce.
• Find less expensive ways to satisfy your desires.

4. Cut down on your spending 

Being financially disciplined involves more than simply planning. It also involves thinking back on prior financial blunders and bad habits to break. Your financial gains may be undermined by impulse spending, even if you budget every cent of your income. Thankfully, you may maintain control by monitoring and reducing your spending.

When tempted to make an impulsive buy, consider if it will help you reach your financial objectives and whether you need it. 

You have a few more alternatives that might save you a significant amount of money when it comes to buying desires. One option is to sell your old goods and then utilize the profits to get the new desirable item.

Alternatively, why not renovate your already existing assets? It will be much cheaper to repair a broken wardrobe than to buy new ones. So use your imagination and think outside the box.  

5. Make saving a habit

It doesn’t matter how much or how often you save, as long as you make it consistent. This will help you develop the habit of spending that will be hard to break. Most importantly, set aside your savings before you spend money on necessities and desires.

This strategy guarantees steady savings even in the face of spending temptations. Additionally, because your extra money will be removed from impulsive purchases and unanticipated fun, the temptation is eliminated.

Plan automatic transfers from your checking to your savings if you want to save even more. The friction that might arise from having to manually save that extra money would be eliminated if these operations were completed automatically. If you can’t afford the automatic payment for one month, you can always go in and adjust it or cancel it, but setting it as the default will make it happen more often.

6. Pay back any debt that you owe

The painful thing about debt is that it haunts your financial situation, both now and in the future. Your future due to interest payments and your present due to the amount you owe. Ideally, you should settle the loan immediately to prevent accumulating interest against you and so that you may start investing more money into assets and other things that you may need. 

As long as you have a debt to repay, it should be your only or at least the major financial objective that you have. It does not make sense for you to be spending money on a new iPhone when you have a debt that keeps piling up interest. 

7. Establish an emergency fund

A lot of people do not acknowledge the importance of an emergency fund until disaster strikes. Being unprepared for emergencies will put you in a crisis financially and otherwise. 

What puts a lot of people in debt is not being prepared for emergencies. You can keep your financial discipline even in the face of unanticipated circumstances if you have an emergency fund, as you won’t have to give up your investments and savings to survive.

8. Fund a high-yield savings account

Make sure you are receiving the highest interest rate whether you are building up your emergency fund or if you already have a healthy savings account.

Due to the little additional interest you will be collecting each month, this will help you increase your savings rate.

9. Invest

You might have paid back all your debt, established an emergency fund, and don’t have any assets you need to buy anytime soon, so it might be tempting to lavish all the money you make on unnecessary spending.

However, try not to fall into that temptation and invest every extra penny that you have. Of course, investing involves a lot of risk, but it is much better than spending frivolously. If you can make good investments, you will reap amazing benefits in the long run.  

10. Consult a professional

Although this may seem a little arbitrary, competent financial guidance may really help you maintain your financial discipline. You should only get financial advice from actual experts, such as tax advisors and financial planners.

If you’re having financial difficulties, these professionals are more than happy to assist you. They can even provide you with customized advice that can help you change your financial situation permanently. 

11. Regularly evaluate and modify your financial practices

The reality is that your financial status and aspirations will change over time. This implies that you need to become better at developing and sustaining discipline.

In order to make sure that your objectives, spending patterns, and budget are in line with your present requirements and desires, you should evaluate them on a frequent basis. 

You’ll need a method for tracking and visualizing your development. This will help you make changes to areas that are lacking and motivate you to do better. 

Conclusion 

Money is hard to make but easy to spend. You’ll end up wasting your money on worthless things if you give into the temptation of spending anytime the urge comes. To ensure a safe and wealthy future, you need to be financially disciplined and take control of your spending.