6 ways to build financial discipline. (And reduce money stress)
Living with less money stress is definitely within reach, but getting there requires financial discipline.
If you're accustomed to a cycle of earning and spending and running out of money, learning to build a disciplined financial life may be challenging, but it's doable. Consider taking these steps to cultivate financial discipline and create a strong, stress-free future.
1. Understand your status quo. Before you can make strategic, disciplined decisions with your money, you need to know money's going currently. Start tracking your spending—every penny—on a spreadsheet, in a notebook, or using a financial app. You can categorize your spending in buckets such as housing, entertainment, groceries, utilities, dining out and transportation. Within a few weeks or a month, you should be able to see trends: Are you spending a larger percentage of your income on restaurant meals than expected? Are you spending a lot of money on things you don't use, such as app subscriptions?
2. Create a budget. To be financially disciplined, you have to have a plan to follow. Now that you have data to show where your money's going, build a budget, also known as a spending plan, to direct where you want your money to go. An easy way to design a budget is to follow the 50/30/20 plan, which means using 50% of your income on needs (housing, utilities, groceries), 30% on wants (entertainment, vacations, dining out, Netflix), and 20% on financial goals (savings and debt repayment). Consider using the 50/30/20 plan as a rule of thumb to build your own budget, allotting a certain amount of your monthly income for each category.
3. Automate savings and debt repayments. It's often easy to justify using extra funds for “wants" rather than leaving some for savings and debt repayment each month. But if you regularly make only the minimum payment on your credit card, for instance, you may continue the cycle of debt for years to come. Instead, set up automatic contributions to savings and to repay your debts. As a result, you'll never have to worry about paying late fees, and you can build a savings fund so you won't have to rely on credit in case of a future emergency.
4. Avoid incurring new debt. A lack of financial discipline is often evidenced by regular, unplanned spending. It's no surprise that undisciplined spending and impromptu purchases often result in unsustainable debt. To stop the cycle, you have to stop taking on new debt. How can you stop creating more debt? Be sure to include a small amount of money (such as $50 or $100) in your monthly budget that you can spend as you choose, so you won't feel completely deprived. And if you're tempted to spend impulsively, try to make more mindful decisions and make a rule that you have to sleep on any purchase for at least one night before buying. Often, the item you feel you must have will seem less appealing the next day—or even better, the next week.
5. Keep a check on your debt. Even if you're making automatic debt payments, you need to know how much money you owe creditors. Create a reminder on your calendar to check your balances on credit cards, lines of credit or personal loans every two weeks, if not every week. Regular check-ins will help you keep track of how much you owe and the progress you're making toward your goals. If you’re more aware of how much debt you currently have, you may be less likely to swipe your credit card for an unbudgeted purchase.
6. Be patient. Changing your financial habits and meeting your financial goals takes time, so be patient with yourself. If you occasionally slip up and revert back to your old ways, don't get discouraged. Instead, keep your eyes on the end results of meeting your financial goals and becoming a more confident money manager with more money in the bank.
Review your budget and goals, remind yourself why you want to make changes, and get back on track. Developing a disciplined approach to managing your finances is worth the effort.
