Financial discipline is all about making spending and saving choices that help you achieve your long-term monetary goals. Often, that means prioritising a larger, long-term reward over an enticing, but smaller, short-term benefit. For example, enjoying an extravagant dinner is fun for a few hours, but using that money to pay off your credit card may save you a lot in interest over the long run. And if one of your long-term goals is to be debt free, making a larger credit card payment now moves you closer to achieving that goal in the future.
Adapting spending and saving behaviour to financial goals may come easier for some than others. But everyone can work on honing this skill. Researchers have found that certain strategies can establish and improve the self-control needed to spend and save wisely.
Benefits of financial discipline
Making impulsive choices that feel good now can undermine your future financial wellbeing. Building up more willpower when it comes to spending money helps reduce thoughtless spending and helps you gain control of your money.
It’s easy to see how this could pay off financially in the long run. For example, if you’re thinking about financing the purchase of a car, a 48-month term will have a higher monthly payment than a 72-month term. If you choose the 48-month option, you’ll be living on a tighter budget for the next four years. You may be tempted to accept the 72-month term, so you’ll be spending less per month. But if you can swing the 48-month option, you’ll end up paying much less over the life of the loan.
Financial discipline may also have an immediate payoff: reduced anxiety about money. Even if it takes a while to see the monetary rewards, just feeling more in control of your financial future may help ease your mind.
Building the habit of self-discipline
Whatever your age, income, or life situation, these steps can help you lay the foundation for a disciplined approach to managing your money.
Assess your financial situation. To exercise financial discipline, you need to know where you stand currently. How in control of your finances do you feel? How prepared would you be if you were to face a financial setback or emergency? At this point, you may want to consider your future financial goals.
Develop a financial plan. Once you’ve assessed your situation, identify any areas in which your current actions don’t line up with your future goals. Then, think about what you could do to improve this alignment. Let’s say one of your goals is a secure retirement but you’re currently contributing little or nothing to your pension. You could draw up a budget that allocates more money for your pension and less for things like clothes, presents, or entertainment.
Set guidelines and rules for yourself. Setting guidelines for yourself is a basic part of financial discipline. You can’t follow your own rules if you don’t know what they are. Speak to a financial counsellor if you need some help creating your financial plan.
Set target dates for goals. For example, you could aim to pay off your mortgage early, for example by 1st October 2035. First, focus on that date - not how many weeks, months, or years are left to go. Then create a detailed plan outlining how you will achieve that goal. For instance, “I will pay $300 extra to my mortgage on a monthly basis, which will allow me to pay off the mortgage by that date.” Studies show that framing time this way is more conducive to long-term financial patience. That may be because it takes your mind off how long you'll have to wait for the eventual reward - in this case, a paid-in-full mortgage.
Expand your knowledge. No matter how much or how little you know about money management, there’s always more to learn. Consider taking a webinar or signing up to receive newsletters from a credible source on investing or buying a home. You may leave with not only more information but newfound inspiration for avoiding impulsive choices.
Manage your emotions. Do you make impulse purchases when you’re feeling stressed or down? If your emotions rule your wallet, you may have an increased likelihood of spending more than you intended or making purchases that you later regret. Pay attention to your emotional triggers for spending. Consider reaching out to a therapist or your organisation’s assistance program for help developing strategies for handling emotional spending.
Strengthen your financial willpower
Financial discipline is like any skill; you can improve it through practice. These tips can help strengthen your control of your money.
Keep close tabs on spending. Make a habit of recording and reviewing what you spend every day. Use a notebook or money-management app and compare what you’ve spent to what you have budgeted. Research shows that self-control is more likely to falter when you lose track of your habits. If you need extra support keeping track of your spending, ask your partner or a close friend to sit down with you regularly to go through your spending record and explain any unusual purchases.
Don’t overtax your self-control. Studies show that trying to make too many choices at once can deplete your willpower. When that happens, you’re prone to hasty, ill-advised decisions. To avoid this, pace yourself. Prioritise your goals and focus on the one or two most important ones. If you start feeling overwhelmed, take a break and do something else for a while, but set a time and date to go back and make those pending decisions. Give your willpower a chance to recover.
Remove the element of choice. Another way to give your willpower a break is by reducing the number of choices you need to make. Set up automatic contributions to your savings and investment accounts. That way, you don’t have to choose to save. Also, leave your credit and debit cards at home when shopping for items that trigger the impulse to splurge. Carry only as much cash as you can afford to spend.
Focus on dreams for the future
The ability to focus on your future is important for prioritising long-term goals. Take a few minutes to visualise what your future will look like.
Imagine yourself at different points in time—2 or 5 or 20 years from now. Then remind yourself that the choices you make today influence your wellbeing from now on. With that thought in mind, it’s easier to see that financial discipline isn’t about depriving yourself. It’s about giving yourself the future you hope to have and that’s within your grasp.