Personal Finance

How To Achieve Financial Discipline in 8 Steps

January 13, 2023
4 min

You probably grew up with a negative impression of the word “discipline”; to some extent, it does live up to its reputation. But the absence of discipline is disorganized at best and dangerous at worst - it is the absence of control and training, two essential practices in managing finances. 

Financial discipline, therefore, is three things:

  1. It is a self-reinforced routine that external factors cannot impose.
  2. It is a learned habit that needs constant practice and reevaluation.
  3. It is the backbone of financial success. 

Money earned fast can be spent just as quickly without a spine to stand against financial temptations. This article will run through the steps you need to take toward a more robust fiscal backbone!

Financial discipline is the first step towards financial independence and stability.

Getting Started With Investing - But How?

On the contrary,

investing does not start with large sums of capital. It begins with the capital owner - you.

Identifying and sticking to your short and long-term goals is foremost, as an intelligent investor would allocate resources towards these, not some blind cause. 

The second step is to listen to the right sources. The influx of information on the internet is a double-edged sword. While our knowledge bank expands, it’s harder to draw the line between giving and draining knowledge. So, spend time researching your research before investing!

Lastly, get started with smart investing today. Your savings account may be an investment, but it’s worth questioning whether it’s smart. Take advantage of compounding interest by starting early, educating yourself on stocks or even riskier (yet viable) investments, and continuously monitoring the evolving financial landscape.

A compound interest example
Compound Interest example. Read more on: The 8 Steps to Become a Smart Investor.

 

These steps are just for getting started. But, getting ahead needs financial discipline. Let’s focus on that.

How To Achieve Financial Discipline

1 - Get Conscious Of Your Current Financial Situation

People forget the intersectionality of finance. Not everyone’s boat is built the same way, but rowing with the resources that you have will still get you to your destination. Acknowledge this difference and look for relatable financial resources because if you listen to the ones out of your scope, you will be demotivated. 

Most importantly, don’t be afraid to admit the results of financial illiteracy in the past. The sooner you acknowledge the problem, the faster you find targeted solutions. Financial discipline is intimidating, hence the investment gap. But calling out your financial situation, no matter how dire, will give you better direction. 

2 - Define Realistic Financial Goals

From consciousness follows strategy and planning. You cannot be disciplined about anything, so you must set financial goals. But, these must be realistic and grounded in your average lifestyle so that investing doesn’t come at your expense. 

You can use strategy by identifying short, mid, and long-term goals and assess your discipline against attaining these. An example of a short-term goal is a monthly savings quota. One tip is to make these goals accessible and visible as a constant reminder and source of motivation!

3 - Prepare an Emergency Fund

Most people advise against preparing an emergency fund before paying off debt.

But being unprepared for an emergency is what gets people into debt! 

An emergency fund is essential to maintain your financial discipline despite unforeseen events, as you do not need to sacrifice your savings and investments for survival.

4 - Pay Your Debts

The aggravating concept of debt is it haunts your past and future financial standing. Your past because of the amount you owe, and your future because of the interest payments. Ideally, you should pay the debt right away to avoid compounding interest against you and so that you can start allocating more money into investments.

5 - Define A Budget

Where your money currently goes is not the same as where it should be. Defining a budget means creating the ideal structure of your inflows and outflows; and, of course, having the discipline to follow them. This ties into your realistic financial goals since this is the direction of your budget. 

Here are a few tips to better stick to your budget:

  1. Make it convenient to track your spending, such as listing them down on an excel sheet. You don’t want your money to be out of sight and certainly not out of mind.
  2. Identify the expenses from previous months that you can cut down, such as eating out and unnecessary subscriptions.
  3. Find cheaper alternatives to your wants.

Financial discipline is not torture; it’s being strategic. 

6 - Set the investment strategy that fits your goals, finances, and risk tolerance

There are multiple factors to consider when investing, and you have to be comfortable with the choice you’re making, or else you’ll end up losing money or giving up altogether. Your investment strategy shouldn’t just be realistic; it should be personalized.

In the age of fintech, it’s easy to access multiple investment calculators and resources that weigh different investment options. You cannot stay disciplined if you’re always hesitating when it comes time to execute investments.

 

7 - Become More Reflective About Your Spending

Impulse spending is so easy with social media and e-commerce, especially as retail therapy has become an escape for many.

Financial discipline, however, is not just forward-looking. It’s also about reflecting on past financial mistakes and unhealthy habits to discontinue. Moreover, it becomes harder to enjoy being disciplined when there’s less money to see yielding returns. So, exercise delayed gratification and reflect on whether your next purchase is worth more than your financial success. 

 

8 - Keep Calm And Patient

Financial discipline, as its reputation, is not easy because it’s a lifelong commitment as you build more financial goals. 

To help you stay on track, identify goals, keep calm, and stay patient. Indicate what a financial milestone looks like as specifically as you can. Whether it be moving out at a certain age or purchasing property with the returns of your investment, keeping a visual representation of what it means to be successful could spell the difference between success or failure 5 years down the road.

To learn more, read also "The 5 steps to successful investment".

 

Getting Started With Peccala

Financial Discipline is a difficult endeavour that, quite frankly, many people struggle with. Automation has come a long way to make the investing process frictionless. From scheduled deposits to automated investing, tech and finance have interwoven deeply and redefined what it means to “make your money work for you.”

Peccala, for example, is an easy to approach platform, perfect for beginners. As it offers different strategies based on your risk appetite, we’re able to satisfy a large target market and propel financial inclusion forward. 

As we prepare for Peccala’s public launch, sign up today and be one of the first to see where the future of automated trading could take us.