5 Personal Finance Disciplines to Master
At this point in your journey toward financial strength, you already may have great momentum. All you need to reach the goal line is to exercise self-control in a few vital areas. I call these personal finance disciplines the High Five because they are the key to achieving your highest potential in life. They are:
- Saving Awareness and Control
- Spending Awareness and Control
- Work Ethic
By automating or delegating a huge share of the discipline needed to master wealth, you can reserve your energy for situations when it is needed most. This is one of the secrets of the successful people with whom I have the privilege to work. They devote their best to challenges associated with their greatest ambitions, rather than squandering valuable energy on secondary pursuits.
Saving and Spending Awareness and Control
Saving discipline starts with figuring out what you need to save to reach your goals, and then treating that amount like any other bill you need to pay each month. Saving discipline is easily automated with direct deposits to a 401k or other investment accounts. Automating spending discipline will simplify that as well. The most common spending problem I see is not living beyond one’s means, though that certainly happens. The more common problems are a lack of spending awareness and the excess time consumed by paying bills the old-fashioned way, which makes it harder to track where your money is going. With the tools I provide to my clients, it takes less than 30 minutes per month to manage expenses, and some clients have it down to 10 minutes. The same tools can generate reports to show if your spending is in line with your goals or not.
Work Ethic and Goal Setting
Work ethic discipline is not a matter of working hard, though that is part of it. It has much more to do with your strategy for deciding what to work on and what to delegate. It is easy to be pulled into handling tasks that you do very well, but if those activities do not energize you, they can be a dead end. It takes discipline to recognize this trap and ensure that your passions are not buried beneath your skills. You thrive when you are able to focus on activities for which you have endless energy, opportunity, and talent. That is where you want to direct your career and even your leisure pursuits, and that is also where goal-setting discipline comes into play.
Goal setting turns the future into a resource. We need to have a vision of a future that is bigger than what we have been doing, even if we have been very successful up to that point. Among my clients, the ones who keep on growing and never plateau use goals as a powerful, inspirational resource. Goal setting generates energy and direction. Sometimes you succeed in reaching your goal, but even failures can bring surprise benefits if you are open to the value that can be extracted from nearly every experience.
Using the past as a resource is a crucial aspect of learning discipline. The benefits of this discipline go well beyond the lessons it can provide. An outlook in life that is geared toward learning reduces fear and increases optimism. You do not want to be cavalier or blasé about failure, but you cannot let fear of failure curb your ambitions. By going into every new venture knowing that you will gain some useful insight along the way, you can keep a positive outlook that will enhance your long-term success.
These High Five disciplines can be mastered by anyone, and they all pay high dividends in the form of wealth creation and preservation. More importantly, they are essential to living a meaningful, productive, and fulfilling life. They reflect the capacity for self-control that distinguishes humans from other species. This same trait distinguishes strong investors from typical investors.
Putting the High Five to Work
I have seen the huge rewards that these disciplines bring for clients like “George,” a successful executive, who had stock options valued at tens of millions of dollars when he decided to retire. His success in the business world derived from the passion he brought to his work, and when he retired, he channeled his work ethic discipline in new directions. George and his wife, Shelly, set a new goal to make the world a better place and help children in particular. Toward that end, George and Shelly used half of their wealth to establish their own charitable foundation, putting their enthusiasm and talent into the task of identifying the best charities to support. Because they had put their wealth on automatic, George and Shelly could devote themselves to this new and fulfilling mission. Their wealth was not a problem to manage or a distraction from the things that mattered most to them. It was a strength.
Another client, “David,” came to me in the prime of his career. He had amassed a portfolio of about $5 million—more than enough to maintain his desired standard of living for the rest of his and his wife’s lifetime—and we gave him the system, support, structure, and discipline to achieve that. This security gave David the freedom to explore a new direction in his career. He became CEO of a billion-dollar company with thousands of employees. By having his wealth on automatic and focusing on the High Five disciplines— the work ethic, the goal setting, the learning discipline, and still controlling his saving and his spending—he was able to more than double his net worth by the time he was ready to consider retirement. He is now in a great position to transition to the next phase of his life, which may include more of a focus on leisure and charitable activities.
For other clients, financial freedom opens the door to a long-postponed ambition. One couple, “Tim and Jennifer,” shared a love for the visual arts, but the daily demands of two successful careers did not leave time to pursue that hobby. After seeing that they could master the spending and saving disciplines and live comfortably within their means, they set a new goal to follow the dream they had looked forward to throughout their marriage. They sold their home and moved to a creative community, with a culture that matched their love for the outdoors and the visual arts. They are truly enjoying the leisure and benefits of the wealth they created together.
Joseph J. Janiczek is the founder of Janiczek Wealth Management. This article is adapted from his book, Investing from a Position of Strength.