Isn’t it crazy how you work hard for a whole month to spend a significant chunk of your income within the first week after getting paid? We get it! It is not just crazy; it is the lack of financial mismanagement. Now you would think, “What do they know about my financial situation?” Well, we might not know your situation particularly, but we understand the psychology of overspending. After keeping the money aside for your utilities and daily expenses, just knowing that you have some extra cash left makes you tick, especially if you struggle with self-control. Little things like retail therapy (as Millenials and Gen-Z explain overspending on clothes), treat yourself attitude, order some extra food to eat later, and more can put you in a tricky position where you will end up spending more than you realize. These are a few things that hamper your financial discipline.
But wait, what is financial discipline?
Financial discipline means your ability to handle, control and prioritize your spending and plan your savings to achieve your financial goals in time. It helps you manage your money as well as maintain your impulse. Discipline by definition means “the practice of training people to obey rules and behave well.” However, the discipline part works a little differently in financial discipline. Nobody teaches you to become financially disciplined; you have to work on it and change your habits and lifestyle to achieve your financial goals.
Now the question is what you can do to become financially disciplined?
Well, the first thing you need to do is realize. Realization is always the most challenging part. Acknowledging and accepting that you are going wrong can help you recognize the patterns in your spending habits. It would be best to have a fair understanding of your financial mistakes because it will help you focus on the solution.
Have a plan
Yes, we know you might feel “Have a plan” is an overrated concept, but the truth is that planning help in organization. When we talk about a plan, we refer to the financial management plan. First, you can start to sort out your finances and know how much you owe to your creditors, family, and friends. The next step is to prioritize your debts and make a payment plan to pay them off. Though repaying your debts is a long process, having a plan makes it smooth.
Set goals & reward yourself
Motivation is one of the keys to success. Setting goals motivates you to work on your plans and achieve them in time. Goals can be as per your financial situation and choice. For example, some people may have the goal to save a particular amount to buy something in the future, whereas other people might have a goal to pay off their debts and achieve financial freedom. Goals are small wins that motivate you. Even a success as small as paying your minuscule amount of credit card debt or saving enough to buy a new bed can be your motivation. In a nutshell, your goals drive you to stay focused and work toward your financial goals.
Budget and Savings
Now that you know what your financial goals are, you need to start budgeting. Begin with adding all your income. It includes your take-home salary, your earnings from other sources, and other allowances. Once you have your income details in place, start listing down your monthly expenses. Set aside money for every category of expenses and see what is left. For example, the basic budgeting categories can be rent, utilities, groceries, transportation, debts, savings. Now assign a particular amount to each of these categories. It will help you prioritize your expenses and figure out how much you are left to pay towards your debt every month.
Automate your savings
You must have heard people giving reasons like “I don’t earn enough,” “I have too much debt to pay,” “I have too many responsibilities to save,” and many more for not saving money. Sometimes, it can be the case, but most of the time, it is psychological. People giving reasons for not saving money rationalize their impulsive spending habits and chaotic financial management skills. When it comes to savings, most people plan to cut back their expenses and save, but they are consistently unable to save due to XYZ reasons. The point is that if you save money in an easily accessible account, you will end up spending that amount on the things you supposedly need. The best way to keep yourself from spending your savings or emergency fund money is to automate your savings. Add an auto-debit from your salary account to your emergency savings account. So, you don’t have to worry about using that money in the future.
Take professional advice if necessary
Financial management is not everyone’s cup of tea. Many of us make wrong financial decisions due to improper guidance or half-knowledge. Since most of us do not have basic financial management skills, we make many mistakes. But our problem is to refrain from asking for help. The first thing is to accept that you are in a financial crisis, and then you can seek help from a professional. A professional financial advisor can help you sort your finances and figure out a way out of the financial crisis. So, never refrain from taking help when needed!
Learn to say no to yourself
When you are an impulse buyer at heart, it is easy to get carried away and buy something you like even if you don’t need it. It would be best if you learn to say no to yourself and control your impulse. Yes, we understand that it is not an easy task; saying no to that favorite pair of shoes you’ve been eyeing or that beautiful bookshelf for your room is extremely difficult. But take a seat and ask yourself, “Do I need that pair of shoes?” or “What is the problem with my existing bookshelf?” If the answer is “Not really” or “There is no problem as such,” trust your instinct and withhold that impulse to buy them. It would not be easy, but it would help you keep your finances sorted and make you financially disciplined.
So, in conclusion, financial discipline is difficult to achieve. It takes determination and willpower to control yourself and see the bigger picture, especially when the bigger picture is “financial freedom” and not something you can hold in hand. Financial freedom and financial security may seem like alien concepts, but they have the power to help achieve your financial goals. And to achieve your financial goals, you need to become financially disciplined.
Do you need help with your overwhelming debt?
We are here to help you! If you are struggling to pay off your debts and are behind on your payments, we can help you resolve your debts and plan your future financial goals. To know more, call us at 0124-6663666 or visit our website www.freed.care.