You know what it takes to be disciplined, you do it every day with your business.
Don’t believe me? Take a look at one of the definitions of discipline:
When growing a business you must follow a system to manage each activity that leads to a successful business. This can be a financial system, a sales system or even an HR system. But every aspect of your business has a system and rules for it to achieve its goals.
You follow systems every day with your business, thus you can quickly learn to become disciplined when it comes to your finances.
Financial discipline, simply requires a system of rules in your personal life that leads you to your desired outcome.
Following is a system and some rules that will help you have financial discipline.
When you don’t know what is important in your financial life it is hard to have any type of discipline. You simply don’t know what you are trying to achieve. If you did not know what you wanted from your sales team, it would be hard to create a system for them to sell. You have to know what you want out of them!
Sit down and determine what your financial priorities are. Is retirement the most important? Kids college? A new vacation home? Car? Kitchen Remodel? Determine what the most important financial things are to you.
Once you know what you want you have to set up a system to manage your priorities. Similar to your bookkeeping system in business, you need a system to manage your personal finances.
I recommend two things for helping to instill discipline:
First, a way to track all your personal finances. This way you know what you have in all accounts. You have a few options but I recommend you use Quicken.
Second, create a big list of everything that you want to do. Then sort it out in order of what is most important to you today. This list becomes your decision maker every time you are about to spend money. This is going to be very similar to your business cash flow reports.
Before you make any purchases first consult the list and see where that expenditure falls on the list. If it is at the bottom of the list then it does not get done.
Bonus tip: To be really effective at achieving your long term goals, plan for retirement outside of this process. Set up retirement as part of your expenses and budgeting. Then use this list only for purchases that come after retirement.
Part of managing any system is to anticipate what needs to be done when something goes wrong.
Thus you need to be ready to adjust your planning when the unexpected happens. One time we had planned on remodeling our kitchen but then we were hit by a storm that caused damage that our insurance company was not going to cover (that is an entirely different blog post to rant about).
So we had to sit down and redo our list of wants to pay for the damage that was not covered. Doing this allowed us to manage the unexpected without adding debt or stress to our lives. We keep our list year round in the order of when we want to do it and how much it will take so that when we need to adjust it is a quick decision.
Make sure when the unexpected happens you take the time to re-adjust and keep moving forward!
Take lots of time to make big purchases, at least one night of sleep would be ideal.
Stop and ask yourself do you really need the item you are about to buy, how else can this money be used, is it a want or need – really grill yourself like a financial coach (or your mom) would.
Most of the time you can talk yourself out of the purchase and that money can go towards your priorities and wealth creation.
Don’t forget to build in fun to your list. Constantly trying to save for the future depletes the motivation and energy that you have. Splurge as you go so that you can keep going on the important stuff.
Allow room for error – if we make a mistake with our money we forgive ourselves and re-adjust to get back on track. Small mistakes are not worth beating ourselves up over. So we forgive and move on.
Financial discipline does not have to be hard, create a system to follow and before you know it you will have achieved your financial goals.