Wednesday 13 August 2014

Being Disciplined


Being Disciplined

When it comes to personal finance, people tend to assume that they need to do a whole host of things and consult a zillion “experts” before they can get on to their “Path to phenomenal wealth”. They are completely off the mark and totally wrong.
While things are not altogether simple and absolutely easy so as to be trivialized, they are very much within the realm of possibility and can be accomplished by virtually each of you.
 
The trick is to
  1. Start early
  2. Be disciplined and
  3. Stay put
Of the above three steps, I would personally regard the second one to be the most critical: Be Disciplined!
Here are some easy-to-execute tips for being disciplined on the financial front:
  • Today, identify a time-slot when you will actually sit and start your basic planning process.
  • At the outset, jot down ALL your sources of regular income
  • Similarly, identify ALL your regular expenses that are completely unavoidable (Like Rent, Taxes, Electricity bills, Monthly groceries, etc.)
  • Identify a percentage of your regular income which SHALL be saved each month. In the initial years of your career, when financial commitments are typically lower, the percentage can be much higher than, say, when you’re married, have a couple of kids and a couple of loans.
  • Convert this percentage into a nice, round figure, say, to the nearest thousand or nearest hundred.
  • Each month, shift this amount AUTOMATICALLY to a separate bank account which will be a “One-way bank account” – This bank account will NEVER be used for routine withdrawals for regular expenses 
 
What you should do with this “One-way bank account” is the subject matter of a separate blog post, and will be dealt with in the days and weeks ahead.
 
For the moment, start off with the aforementioned “baby steps” to become financially disciplined. Those of you who are familiar with the Power of Compounding would know the likely positive impact due to these “baby steps”. The rest of you may wish to do a Google search to find out about what Einstein famously referred to as the “Eighth wonder of the world”. Or, if you so desire, refer to my own blog post on the Power of Compounding a few years back (Using the Power of Compounding).
 
Regards,
 

N

 
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