The biggest reason for many people’s financial problems is a lack of discipline. The lack of discipline, mastery, and control plague many people’s lives. Many of us are unable to delay gratification in the short term.
A study called the Stanford Marshmallow Experiment in 1972 is a perfect example that illustrates the lack of control. In this study, a child was given a choice to either take a small reward right now or wait 15 minutes for a bigger reward.
Researchers observed that children who decided to wait for a bigger reward performed better in life such as scoring higher SAT scores, better education outcomes, and other areas in their lives. Researchers believed that children’s choices depend on their willpower.
A later study with a larger sample population showed that economic circumstances also play a role.
So, we now know that willpower and economic circumstances determine how well you can keep your wallet in your pocket. These two factors are important in your financial success. Many people have the tendency to treat themselves by spending everything they earn (and often more than that) on literally everything they can get their hands on.
Not only this prevents them from having enough savings to achieve financial independence, a problem that is prevalent in America, but some people can also even go into crushing debts and their entire lives ruined. Only a few people stop and think about this consequence because there are still plenty of people who continue to spend incessantly as if there is no tomorrow.
While spending money becomes easier, earning it is not so difficult. We are living in the richest and abundant time in all of human history. There are more ways to make money and become wealthy today than ever, each suited for different kinds of people with different sets of skills.
You are very likely to achieve financial independence right now so long as you make a resolution to do so and follow through with actions.
What I’m saying is that no matter who you are and what kind of skills you have, you can always make money.
That also means that making money isn’t the problem. It’s about making sure the money is well spent.
The Reasons For Financial Problems
To solve a problem, one must understand why it happened in the first place. Again, I want to point out that the problem isn’t that most adults have low income. The real reason is that many of them lack self-discipline and cannot delay gratification. So then how come this weakness is so prevalent among adults nowadays? You can trace it back all the way to childhood.
Think back to the time when you were a child and someone gave you money, be it a gift from a friend or relative or it was your allowance. What would be the first thing to cross your mind? Most children would think that they can use that money to buy candy. After all, candy is sweet and delicious. Candy is a wonderful treat for children. They love candy and they could never have enough of it.
Given the opportunity, children will continue to enjoy this wonderful, sugary treat until they become physically ill because it just tastes so good.
So, when these children grow up, they develop a conditioned response. Psychologists explained that it is a predictable response to a certain circumstance. In this case, people who received money from any source will think of ways they can spend it on things that make them happy, albeit temporarily.
Spending Makes You Happy
As you grow up, get a job and start earning money, the conditioned response persists. Many people’s first thought would be on how they can spend this money to achieve immediate pleasure? Now, I’m not saying that treating yourself to something nice once a while is bad. If you worked hard, you surely want to make it up to yourself somehow. In such a case, you can certainly indulge a bit to reward yourself for your time and effort.
The problem is that many people overdo it.
Here’s another example. When you go on a vacation to an exotic place, you will find that there are countless hotels and streets full of shops that sell shiny, beautiful, but ultimately useless trinkets, bobbles, clothes, artwork, and other items that you would consider little more than garbage at home.
Why do you think shops do this? This is because you feel happy and relaxed when you are on vacation.
If you have a conditioned response similar to children with money, you will associate happiness with spending money. So, the happier you are, the more generous you are. You are unconsciously compelled to spend money on something or anything you see.
You can see how this can spiral into a shopping spree. So they end up buying tons of stuff that they don’t need just because they need to cheer themselves up.
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5 Powerful Ways to Develop Self-discipline to Achieve Financial Success:
Use self-discipline to rewire your responses about money
To achieve financial independence and success, one needs to develop their self-discipline. This is primarily geared to rewire the brain to have a different attitude toward money. In other words, you need to practice self-restraint so you can change your money mindset. This involves reaching deep into your subconscious mind and cutting the ties between spending money and happiness. Then, you reroute that happiness line to something else more productive. In this case, it’d be saving and investing.
To begin making the change in your way of thinking and remove financial problems down the road, I recommend you go to your bank and open a “financial freedom account”. This account only allows money going in, not out unless it is to achieve financial freedom. This account will be your long-term savings account.
Associate happiness with financial independence
When you start saving like this, you may feel something profound. I know it sounds silly, but there’s only one way to find out, right? But I can assure you that you will start to feel content when you know that you have some money in the bank. It doesn’t really matter how much money you initially put to open your account.
The action of opening the account alone gives you the feeling of better self-control and power. You just feel happier about it. You don’t see it, but what you did is associate happiness with financial independence.
When you create that account, you start to emotionalize money with your thoughts and feelings. It creates a force that compels you to start saving more and more. For instance, if you save only $10 a month for a year, you will find that you have a little bit more than $120. You might have up to $200 depending on the interest rate. If you can spare $100 a month, then you will have $2,000 at the end of the year.
So the more cash you have in your financial independence account, the more compelled you are to start saving more. When you save more, the more money your account generates. You actually make more money by simply saving. That’s not all. When you start saving and changing your money mindset, the more money will come your way.
Those who have practiced this simple habit of regular saving are shocked when they find that they suddenly have more money in their savings account, not to mention how quickly their financial problems vanish.
When you rewire your belief and view toward money (spending doesn’t lead to happiness), you learn to pay for yourself first. This is the only rule you need to know about financial independence. “Pay yourself first” means that you spend your cash on necessities such as rents. Anything left goes straight to your savings account.
Create a money objective
Before you can start to change your behavior towards money, know where you want to go first. People don’t create goals because they don’t really know what they want (so they don’t know what their goals should be), or because the goal-setting process is too complicated for them. Perhaps you have created ones in the past but they did little for your financial situation.
Whatever the case may be, I urge you to still stick to making money objective. But this time, I want you to take a more simplified approach. This time, instead of thinking of the exact figure, simply assign a word or a short phrase.
Instead of defining the destination, identify the direction you want to go. In life, there is no real end-goal, so all the goals you’ve set serve as milestones so you know you are headed in the right direction. Instead of setting those milestones, define the direction. This objective serves as a theme and you can change it as often as you like.
For example, if you are concerned whether you have saved enough for retirement, then your money objective can be something as simple as “future needs”.
If you have a bad habit of overspending when you shop online, then your objective could be to “spend mindfully”.
If you want to prepare for your children’s education in advance, then your objective is “kid’s college”.
The money objective here is both vague and precise. It is vague in the sense that you don’t know how much is enough but when it comes to saving money, there’s no such thing as enough.
What is important here is that you are clear about your true money objective.
It strengthens your financial willpower and gradually helps you develop self-discipline. You don’t have to prioritize what you should start saving up on, either. You just have to pick an objective that you feel strongly about and then follow through with actions.
You want to make saving money as convenient as possible. Knowing how lazy human beings can get, the slightest inconvenience can stop you from achieving financial success and independence. It doesn’t matter what your money objective is. Incorporate automation into the practice.
It helps add more discipline to your financial life and minimizes the chance for you to forget your money objective and spend money needlessly.
Automation here takes on many forms. For instance, if you have access to a retirement plan such as the 401(k), 403(b), or 457, then you need to start participating and contributing as much as you can. The main reason why such accounts are so successful is because of automation. Workers get to save money because the contribution funds are deducted from their salary automatically even before they see the money.
Many companies offer the option for a direct deposit that can be split into many accounts like checking and savings. That way, it is very easy to start saving once you get the system set up. For example, you can set up an automatic transfer to move your cash from your checking account to your savings account, or any other type of accounts like 529 college savings plan, health savings account, or IRA.
When you get all the automation systems set up, you don’t have to think about saving as much anymore. It takes away the stress of managing money. You just set it and forget it. A few years down the line and you will be surprised by how much you managed to save up.
I understand that some people develop a spending habit and practice it so often that it is very difficult to stop. If this is you, remember your money objective and be aware of how your spending habit is holding you back and lead you in a different direction away from your money objective. To be financially successful, you need to learn how to live below your means by cutting away unnecessary expenses.
Other than that, draw a line for yourself. Define how much money is too much to spend in one go and if you have to cross that line to buy something, wait for at least 3 days before making the purchase. Be realistic with the amount, though. I recommend looking at how much money you can save at the end of the month and draw the line in the sand there.
Change your environment
Sometimes, your habits are tied to your environment. Sometimes, all you need to stay motivated is to remind yourself constantly of your money objective. So, put up posters or notes around your home, car, workplace, and other places that you pass by frequently to remind yourself. These notes can spark inspiration and remind you to stay committed.
At the end of the day, what makes a person financially successful isn’t how much they earn, but rather how much they spend. It doesn’t matter if you are a billionaire because you can literally spend every single penny in a day.
Think of finance as a bottomless cup and finance management is you, patching the hole. It is more like controlling your expenses than maximizing your income. To achieve this, you will need to practice discipline and that means discipline. They say that self-discipline equals freedom, but not in the sense that you can do whatever you want. Instead, freedom here means being free from the financial troubles you will encounter down the road. It won’t be easy and it requires consistency, but your efforts will be rewarded.