Financial Discipline Leads to Financial Freedom
Financial Discipline Leads to Financial Freedom
The term “financial discipline” is a word not many people use or seen before. It’s also a word rarely used at all in the personal finance or the financial industry.
Financial discipline is having control over your spending and savings so that you can achieve monetary goals. This skill can’t be developed overnight and will require you to build a habit. It’s where discipline is needed.
Most things in life, you will need the discipline to achieve something worthwhile. Some people say motivation is what drives you, but motivation is something that helps gets you started. It’s not long-lasting.
Eventually, motivation dies out, and you’ll fall back onto non-productive habits. It’s why having discipline will keep you on track. You’ll set your own rules and behaviors to stay on track with your finances. Then you’ll build a habit from it and will be much closer to your lifelong goals.
Once you build a habit and follow it with discipline, then you won’t have to think about doing it. The behavior will be automatic, and you can put your focus on other matters.
If you want to be healthy, then you must continue to eat the right healthy foods. If you want to be stronger, then you must eat healthy foods and workout consistently. Do you want a better job? Then learn what it takes to earn that better job. Anything you want at life requires discipline.
It’s why financial discipline leads to financial freedom. You would know how to manage your spending, how to save and invest, buy things that will generate money rather than consume, build passive income, and retire early.
By doing the hard work, staying productive, knowing how to manage yourself, and remain consistent for a long time, you’ll achieve financial freedom.
Ways Financial Discipline Leads to Financial Freedom
1.) Debt Free
A major obstacle that stops most people from creating financial freedom is debt. Debt in itself is not bad. There are good debt and bad debt.
Good debt is an investment, such as getting a business loan for a well-planned business you’re building. An example of bad debt is buying a luxury car with a car loan when you’re living paycheck to paycheck.
If you’re able to understand how debt works and the terms of condition, then you can utilize it to benefit you rather than the other party. You must discipline yourself to pay off debt as soon as possible rather than later.
Most debt has an interest rate, and it will increase more if you’re not able to pay on time. You don’t want to waste extra money on paying interest to someone else. Pay it off and feel relieved you don’t owe anyone any more money.
2.) Create a Savings/Emergency Fund
Everyone should have an emergency fund with enough saved up to last 3 – 6 months of living expenses. However, based on the COVID-19 pandemic, it shows that most people didn’t save enough and are living paycheck by paycheck.
A near 15% of Americans had to file for unemployment due to the pandemic when it started. Studies done by GOBankingRates survey in 2019 showed nearly 70% of Americans have less than $1000 in their savings account.
This amount isn’t enough to cover most rental and mortgage expenses. The real estate market continues to grow an increase in price, while wages continue to remain the same.
If people can set aside a small percentage of their paycheck into their savings account, then I believe most people wouldn’t fall into this unemployment dilemma. Also, be willing to take more calculated risks with their financials.
For example, by setting enough for savings, then you’ll have the opportunity to leave a terrible job immediately and search for another job that pays more based on your level of experience and one you enjoy doing.
Everyone will experience an unexpected financial emergency sometime in their life. Keeping enough money in your savings account will prepare you for most unexpected emergencies.
You’ll reduce stress, fear, and panic knowing, you’ll have enough money, should an unfortunate circumstance comes to you that requires a large sum of money.
3.) Investing
Once you have enough in your savings, then you’ll invest your money wisely to make more money. Don’t let it sit in a regular savings account with a very low-interest rate. Let your money work for you to generate more money.
Look at investing in the long-term rather than the short-term. Short-term investing, in general, have a higher risk of losing money, due to wanting higher returns. Note you can invest short-term but understand the type of investment.
Research what types of investments match your level of comfort. Most people that want to get rich fast are losing money rather than gaining more money.
These people don’t have a strategy in place if their investments increase or decrease in value.
Have an investment strategy and follow it through.
4.) Financial Minimalist
You can recognize what is worth buying or not. Most people living in America overspend on everything. From eating out, spending on expensive clothing, or buying things out of impulse.
As a financial minimalist, you would see other options to cut spending or choose not to buy things. So, instead of eating out, you cook at home, instead of buying expensive clothes then buy cheaper similar clothing, instead of buying now you wait for discounts.
You can take financial minimalist to an extreme. You don’t have to be an extreme cheapskate and not buy anything. You’re allowed to eat out, spend on expensive clothing, and other things. Just don’t build a habit of overspending.
Set a limit on how much you can eat out, how much you’re allowed to spend on expensive clothing, and other things. Treat whatever you’re buying as an investment.
Think about what are the pros and cons, how long will it last, and consider the price. You’ll make better purchase choices.
5.) Personal Development
If you know how to manage your finances and not fall for emotional spending, then you’ll develop your character. You’ll assess situations better than you did before.
By being disciplined in one area, you’ll transfer it into other areas into your life from following your diet and resist eating foods outside of your diet plan, planning out your workouts, and improve your social life.
You’ll more than likely have extra money from being financially discipline and will understand how to invest that extra money to gain a new skill or starting a side-business.
By spending money on courses, mentors, or knowledge, you’ll accelerate your learning of a particular skill than doing it on your own, and you may learn new insights that are not free online.
The majority of billionaires and millionaires don’t spend money on expensive things like super-cars, private jets, or super-yachts. They understand lowering their spending while maximizing their business is what generates more money for them.
If they spend money on personal things, then more than likely, their business will fail. One example is Steve Jobs, founder of Apple, who wears the same gray turtleneck and jeans every day. It allows him to focus more on the business than picking his clothing to wear for the day.
Anyone can learn to have financial discipline. You must be willing to learn and accept a new way of handling your finances.
