If you feel as if you aren’t clear about where your money goes or why you aren’t saving as much as you’d like (or why your credit card debt isn’t going away), you might benefit from some financial discipline. While the word “discipline” can sound harsh, it’s really just a way of saying that you have found money-management habits that lead to success. It’s not about saying you can never buy concert tickets or new shoes again.
Having financial discipline can help you take control of your money, gain independence, and save for your big-picture as well as short-term goals.
This guide shares seven essential ways to achieve financial discipline and enjoy its rewards.
What Is the Meaning of Financial Discipline?
Financial discipline is the act of setting specific monetary (spending and saving) goals and measuring oneself against how well they are achieved. Once that financial discipline is established, a person can take further steps to becoming financially independent.
Financial independence means having enough money to pay one’s living expenses without being dependent on people or a particular employer. It provides a financial runway that’s flexible enough for a person to make decisions based on short- and long-term needs instead of the immediate state of their finances.
💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.
How Can Financial Problems Be Improved?
Financial problems can bring about a level of stress that might be difficult to shake. Sitting and worrying won’t necessarily change the state of a person’s finances, but putting together a financial plan is a tangible step in the right direction.
By confronting their current financial realities and committing to practicing money discipline, a person who’s struggling with stressful financial problems can improve their overall outlook and make progress toward a more stable financial future.
7 Steps For Achieving Financial Discipline
There are many paths to financial discipline, but these seven steps can help you create the habits that help you take control of your money and your financial destiny.
1. Getting Clear About Financial Goals
It could be difficult to get disciplined about money without embarking on a vital first step: setting financial goals. Writing down specific short-term, mid-term and long-term financial goals can help whittle things down even further and illuminate a plan for how to proceed.
Here are some common examples of financial goals (though real goals will vary depending on a person’s individual priorities and plans). They range from short-term money goals to longer-term ones:
Short-term Financial Goals
• Paying off credit cards and charge cards
• Paying off student loan debt
• Setting a spending limit for the month
• Setting up an emergency fund
• Saving a certain amount each month
Mid-term Financial Goals
• Saving money for a trip abroad
• Setting aside funds for a major gift
• Putting away money to buy a big ticket item like a boat or car
• Saving up for an important home renovation
Long-term Financial Goals
• Setting aside money for retirement
• Saving for a dependent’s future college tuition
• Putting away money for a down payment on a house
• Investing in stocks and bonds for future returns
💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
2. Creating a Convenient Budget
Building a monthly budget isn’t necessarily at the top of everyone’s bucket list, but seeing spending habits and current expenses in black and white can make it easier to get a handle on overall finances. Whether it’s written out by hand, using an online spreadsheet, or finding software that helps turn financial data into a trackable budget, there are many ways to build a budget.
Once someone finds a system that works, they can better understand how much money they’re making versus how much they’re spending, saving, and possibly investing. The transparency that comes with creating a budget can bring them closer to becoming financially disciplined.
3. Paying Down Existing Debt
Debt comes in many forms — from student loan debt to car loans, medical payments, mortgages and credit card debt. It might seem fairly obvious, but paying down debt as a step toward financial discipline can make it easier to start the subsequent steps like saving money, making investments and planning for a brighter financial future. Adding the debt paydown directly into the budget ensures it’s consistently covered each month.
4. Opening a High-Yield Savings Account
There’s no specific answer to “How much money should I have in savings?” However, it is important to get started and contribute regularly. Even if it’s as little as $20 a month, setting something aside for savings in spite of one’s current debt-to-income ratio ensures some funds will start to add up. By opening up a savings account and setting up a recurring deposit, a pivotal piece of financial discipline can practically go on autopilot.
Of the different types of savings accounts, the specific kind you choose can make a big difference. According to the FDIC, the national average interest rate on savings accounts as of August 21, 2023, was 0.43% annual percentage yield, or APY. In the case of certain high-yield accounts, however, interest rates can reach 4.00% APY or higher (these are typically found at online banks).
By putting money into a high-yield savings account, it’s simple to earn even more money just by setting funds aside in the first place.
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5. Establishing an Emergency Fund
More than one in five Americans have no emergency savings; about 30% of people do have some money set aside for a rainy day, but not enough to cover three months’ worth of basic expenses. That means these individuals would likely have to take on credit card debt, a personal loan, or ask family or friends for financial help if they, say, lost their job or had unexpected bills to pay.
Establishing an emergency fund isn’t just a step along the path to financial independence, it’s a way to weather unforeseen expenses without having to worry about day-to-day expenses being paid for or financial goals being met.
Most money experts advise socking away enough to cover three to six months’ worth of living expenses. You might want to automate your savings to help you reach this goal.
6. Cutting Back on Spending
Despite the best of intentions, overspending happens. Whether it’s a pileup of holiday gift purchases, a particularly eventful summer, or a lavish trip overseas, spending more than what you earn is bound to occur from time to time. If it happens constantly, that’s another story.
Cutting down on spending is a tangible way to practice sound money discipline. There’s no one-size-fits-all approach to doing so, but by building a budget, hunting for bargains, creating ironclad shopping lists, using promo codes and coupons, and thoroughly tracking spending, it can be easier to cut back and get one step further to financial independence.
7. Seeking Sound Investment Strategies
If you’re searching for a head start to financial independence, familiarizing yourself with a wide variety of investment accounts and strategies can help get you on the map. Depending on your individual financial situation, weighing the risks and benefits of certain account types, penalties, fees, and the ability to access funds can help you select the right investment strategy.
By researching different markets and understanding your personal risk tolerance, you can select an approach to investing that directly aligns with your current and future financial goals.
Focusing on Financial Planning
The term “financial planning” might feel more like a unicorn you only get to meet when you’re floating high on a cloud of financial independence, but it’s actually another sound step along the way. These days, financial planning isn’t designated for the already-wealthy, it’s becoming accessible and essential for people at every stage of life. In fact, in the age of digital transformation, financial planning can even be automated.
The Takeaway
Financial discipline or money discipline is the act of setting specific financial goals and tracking their achievement. By practicing financial discipline, you can create a budget, build up savings and an emergency fund, hit your money goals, and make progress toward a more stable financial future.
Finding the right financial institution to suit your needs can be another important step. Doing so can help you track your saving and spending and budget better, as well earn interest on the money you keep stashed away.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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