Financial discipline

Discipline is adherence to a code of behavior and set of rules. Financial discipline is therefore the adherence to the rules of financial management and prudence. Many of us struggle with financial discipline, mainly because we think it is our money and we should be free to spend it how we like. That of course is very true. But should the “you of today” spend everything so that there is nothing left for the “you of old age”? We must learn from the proverbial ant who prepares the food he will eat in the winter, during the time of harvest.

The first step in financial discipline is setting realistic goals, then developing plans with detailed action steps that would lead to the achievement of those goals. Many of us go this far. We set the goals and develop the plans but are not disciplined enough to follow through with consistency.

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To help us we need to set up structures that support financial discipline like payment standing orders, direct debits and reminders (available on PFM Apps).  We can also keep ourselves motivated with the use of banners and screen savers on our cellphones and other devices. Coin a short motivational message that pops up every time your phone is idle for more than five minutes. Help can also be received from people with similar goals. Find a mentor who would keep you accountable for your financial progress. Find a trusted friend that you can share details of financial transactions with and you can jointly motivate yourselves to attain greater heights. 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 economic news. You should also read biographies of financially successful people, so you can learn some of the principles they used to attain and sustain financial discipline.

Every form of discipline demands a change in lifestyle. Weight loss programs demand regular exercise and change of diet; academic excellence requires effective time management, less sleep, less socializing etc. Financial discipline also demands a change in lifestyle; a 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 mates. The solution to this is to have another set of mates, who can counter the negative influence. If for instance someone is pressurizing you to buy one hundred thousand Naira Aso-Ebi, and you feel yourself about to cave in, share the news on your investment WhatsApp group and get their opinions. I assure you within ten minutes, your urge to conform to the negative peer pressure would have vanished.

Discipline can also be achieved through short term goals and challenges. Cut big goals into smaller bite sizes. Instead of being overwhelmed with a goal of achieving one million naira savings within two years, why not break it down to two hundred and fifty thousand within the next six months? That goal is smaller and easier to pursue. You can also challenge yourself financially. For instance, you can choose not to eat out or buy takeaways for one month, once you see how much money you can save, you would be motivated to reducing future expenses on restaurant foods.

Financial discipline must be undergirded by focusing 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. In focusing on the future, we take one day at a time, one financial decision at a time. The student who graduates with a first class does so by obtaining A grade in majority of her tests, assignments and exams. Similarly, we too must remember that each transaction is important and adds up to how soon we achieve our financial goals. This essentially is strategic thinking – thinking (and acting) with the end in mind. Financial discipline requires strategic thinking and spending.

Happy investing.