Listen to advice and accept discipline, and at the end you will be counted among the wise…
Our lives are increasingly saturated with self-centered, short-term messaging. It almost feels impossible to go anywhere or do anything without being bombarded with narratives of instant gratification— especially where technology and social media are involved.
We would venture to say that it has never been harder to live life with a long-term, community-focused perspective… And yet, this external reality need not mean that your internal discipline — and especially financial discipline — has to fall by the wayside.
The truth is that no cookie-cutter approach to saving, investing, or budgeting will save you in an age as complex and overwhelming as ours. There is wisdom to be found in tools centered on those practices, to be sure (we have written articles about them, and this blog even points to a few), but the primary need of our age has more to do with how we think and make intentional decisions than the specific tools we employ.
If this article stands for one thing, it is this: compassionate resistance! Financial discipline can be a great weapon to take back control from the prevailing systems of this world, and to do so not just for your own sake, but for the good of those you love.
Although this is primarily a financial blog designed to help you steward your finances and manage your money, rest assured that if you put the following eight insights into practice, your whole life can reap the benefits.
Insight 1: A Fundamental Mindset Shift
Before you start practicing financial discipline, you have to understand the basics of financial literacy. And in our context, there is nothing more foundational than asking the question: what even is money?
You have likely inherited an unconscious answer to this question from your family of origin, the friends you spend the most time with, or the media at large. Most of those sources present money as an end in itself — a thing to be “attained” — but the truth is that money is just a store of value, a medium of exchange.
What that means is that the numbers on your bank balance are sitting, waiting for you to direct them towards a greater purpose — for instance, towards a downpayment for a house, or an investment into your child’s 529 fund. Numbers without action are meaningless.
Even more important than individual, tangible applications of money are the values you use to determine those applications in the first place; for instance, stability, family, or responsibility. And with that thought, we would suggest that the values you hold dearest are the values you should apply most directly to your financial resources.
Why is this worth stating from the outset? Once you realize that financial discipline is not just about increasing the size of your bank account or investments, but is instead a way to help you make the greatest impact possible, your values will more directly shape not just your internal world or your family, but the community you live in, and, one day, the wider culture itself.
Insight 2: Budgeting Beyond Basics
Now that you can see how the bedrock of financial discipline is values-based decision-making, you are ready to move on to your first practical application: budgeting. We are not, however, suggesting budgeting for budgeting’s sake; instead, we would like you to think of budgeting as a representation of intentionality.
Intentionality means acting both with an awareness of the options before you and clarity as to how your personal values apply in a given situation. Through budgeting, you can discover both of those things: you will get to see how you are spending your money, item by item, and what your spending choices say about what you treasure most in this world.
Moreover, by reflecting on your current budget, you can choose how best to act moving forward:
- “Am I satisfied with my spending habits?”
“Are there any additional values I would like to express through my financial decisions?”
“Are there any long-term goals I could be preparing for instead of some of the spending items on this list?”
When intentionality is the guide for your budgeting practice, you will understand that it is not a one-and-done event. Instead, your budgeting can include things like forecasting, reviewing, and adapting your financial plan regularly, to better align with your life goals and purpose.
Insight 3: Investing with Empathy
With intentional budgeting roots secure in the soil of your financial discipline practice, you can focus on the next key value for financial discipline: stewardship.
Your very existence is a gift: you did not choose to come into this world on your own! You were born to parents whose circumstances determined your starting point in life — and this is uniquely true for every human being. That said, the fact of your existence is also an invitation: an invitation to make the most of all you have been given.
That — making the most of where you started, and watching it grow — is what stewardship is all about, and that is also why it is closely connected to investment.
As we said at the beginning of this post, investment, like any other financial vehicle, is meaningless in and of itself. However, when you see investment as a way to look after what you have been given, and to pass it on to the next generation, you are imbuing the practice with value: the value of stewardship.
Although you did not choose how you came into the world, you can decide how you will leave it, and who you will leave it to. With this kind of stewardship mindset, you can make investment decisions with a long-term perspective.
Depending on your circumstances, that could mean saying no to “the latest trend” or “hot stock” and instead focusing on lower-risk investments with a greater time horizon. Equally, it could look like funneling your assets toward a higher-yield savings account, and forgoing the stock market entirely (capital is always at risk, after all).
If you do want to make the most of the opportunities the stock market has to offer, then ensuring you or your portfolio manager incorporate diversification, rebalancing, and low-cost options would also be expressions of a sustainable stewardship approach.
Insight 4: Your Impenetrable Emergency Fund
If you did not control your own birth, it is equally true to say that you do not control when disaster strikes. Borrowing insights from the realm of theoretical physics, in the form of Heisenberg’s uncertainty principle and Schrödinger’s cat paradox, we can say with confidence that life is fundamentally unpredictable (and yes, the irony is deliberate).
Even in the midst of uncertainty, financial discipline can provide another values-based answer: resourcefulness in the form of an emergency fund (typically, three to six months’ worth of expected expenses).
Resourcefulness is about making the most of what you have in a given situation. It stands to reason that if you have an emergency fund that you have intentionally built up over time, alongside the investments you have stewarded, you will be in a better position than most to navigate unexpected, unwanted events like losing your job or experiencing a sudden, costly bereavement.
The difference between having an emergency fund “just in case” and having an emergency fund that epitomizes your resourcefulness is that this value also means stretching what you have, rather than continuing as if the unforeseen event had not happened.
Resourcefulness also means acting with ingenuity to open up other sources of replacement income — for example, reaching out to friends and family, or calling in favors from those you have shown kindness to in the past.
In this way, your true ‘emergency fund’ might actually be a resource embedded deep within your personality and outlook.
Insight 5: Using Strategy to Conquer Debt
As we indicated in our previous insight, resourcefulness is multifaceted. That is why it has implications for our next component of financial discipline, too: strategic debt reduction.
When faced with mounting or even seemingly insurmountable debts, it can be tempting to up and run — to ignore the problem and pretend it will magically go away. This is a poor strategy that will only lead to destruction in the long term.
Instead, the best way to face debt is with a healthy one-two punch of honesty and — as we mentioned — resourcefulness. Honesty will help you express where the debt mountain is heaviest, and resourcefulness will help you make temporary penny-pinching decisions that will get you out from under its shadow.
How can I deal with debt?
- Prioritize paying off high-interest debt first;
- Explore debt consolidation options with your bank and creditors (engage in honest dialogue); and
- Go back to your budget to determine how you can rebalance your spending (from something as small as canceling your Netflix subscription to something as big as moving to a smaller, lower-rent environment).
As every AA member knows, you cannot move past the burdens of your situation unless you acknowledge them first. Only after you have accepted and understood where you are at can you move forward with hope for the future.
Insight 6: The Power of Forward Thinking
Where resourcefulness and honesty can help you with the pressing, short-term requirements of debt management, this next super-powered value is all about connecting you with the future your heart desires: imagination.
Imagination is all about taking the time to stop, pause and visualize what the years ahead could hold: what life after retirement might mean for you, how you might watch your children and grandchildren grow, and how you can support the causes you care most about.
As you close your eyes and paint a picture of the world to come, notice what stands out to you — what feels like it carries the most emotional weight. With that visual awareness in mind, you can start to connect those long-term aspirations with your present goals and circumstances.
Financial discipline and imagination might not seem like natural companions at first, but when you consider that your imagined future is likely the fully-fledged version of your present values, everything starts to connect. It’s much easier to make intentional, costly choices now if you can see how those choices are seeds for the latter parts of your life.
One practical focal point for your imaginative pursuits could be Retirement Planning; in which case: why not check out our free resource on planning for retirement here?
Insight 7: The Everlasting Pursuit of Financial Literacy
The financial world, much like the rest of the world, is in constant flux, with new products, regulations, and technologies emerging regularly. In order to keep up with all the coming and going, you will be well-served with our seventh deep financial discipline: curiosity.
Lifelong curiosity will help you adapt to the changing financial landscape, both in your own journey of financial literacy and beyond. Much like intentionality, holding this mindset will help you to make better, more informed decisions based on contemporary circumstances.
It could also keep you from getting stuck in a pattern of behavior that has been proven ineffective, and it might even give you the tools you need to take a more active approach when it comes to your investment portfolio, as your expertise naturally grows with time (even if you’re not a financial professional).
For all of you keen to start exercising your curiosity muscle as part of your practice of financial discipline, there are plenty of blogs and newspapers — like the Wall Street Journal or the Financial Times — that can keep you in the loop with all the latest developments in the markets. There are also many industry experts who offer their perspectives for free via newsletters and websites, including the one you are reading now.
Insight 8: Seek Wise Advice
The last by by no means least important value we want to connect with financial discipline is humility. We saved this one for the very end, precisely because it underpins all of the others. If you believed you already had everything figured out, you would be unlikely to pursue financial discipline at all — and you probably would not have read this far, either.
Perhaps the most obvious and helpful expression of humility in the context of financial discipline is in seeking wise financial advice. Not everyone can be a certified financial planner, but that shouldn’t stop you from getting help with your investments or even managing some of your financial affairs on your behalf.
It takes a wise and humble person to know when they have reached the limits of their expertise or time availability; sometimes it’s just more efficient to ask for help from those best placed to offer it.
If you find yourself in need of financial advice, or any kind of help with your financial affairs, and you live in the Greater Pittsburgh Area, why not reach out to Iron Point Financial today?
Summary Thoughts
So, after all of that, how can we best describe financial discipline?
Financial discipline is a mindset shift towards values-based decision-making that includes:
- Intentional budgeting practices;
- Compassionate investment for future generations;
- Resourcefulness to deal with setbacks through your emergency fund;
- Honesty when managing and paying down debt;
- Imagination and visualization of your financial future;
- A curious perspective for lifelong learning; and
- The humility to seek wise financial advice when needed.
If you start putting these values to work — whether through your finances or in any other part of your life — you will soon see how meaningful each choice can become, and how much of an impact you can have during your time on earth.
Further Resources
Disclosures:
The opinions are those of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives. and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Advisor Networks LLC cannot guarantee or represent that it is accurate or complete.
