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How to develop financial discipline

By Sara Okuoro | Jan 9th 2020 | 4 min read
By Sara Okuoro | January 9th 2020

Dear Dr Pesa,

I am 26 years old and I’ve been employed for about two and half years now. I earn Sh50,000 monthly, but by 10th I never have anything left. I have always believed that I should thank myself with my salary since I work so hard for it but I think I overdo it. I am also very generous so whenever someone asks for money, I don’t hesitate to give. I’ve been told I have financial indiscipline. I’m not sure how to tackle that but I know it will be a problem especially because I want to settle down and start a family. Please help.


Dear Martin,

A lot of others also struggle with financial indiscipline and it is good that you have realized this and want to change it. Many of us were taught how to make money but not how to manage it, and at home, we did not talk about it beyond noticing that ‘money does not grow on trees.’

Financial discipline refers to how well you are able to conform your spending and saving to the plans that you have set for yourself. It is a continuous process and it evolves as your priorities change over time. It is also based on the understanding that money is just a tool and that you control your money, money should not control you.

The first step to create a financial plan is to set goals for yourself. What is it you want to achieve? You’ve mentioned you want to settle down and start a family, so you will need to keep that in mind as you set your financial goals. How much do you need to save in order to provide for your future family? You need to have something clear to work towards.

After establishing goals, you will then have to develop a personal budget. Financial success begins with creating and adhering to your budget because it will give you a clear picture of how much money you are receiving and how you spend it, therefore, allowing you to make smarter decisions with your finances. As you make your budget, identify all sources of income and all your financial responsibilities, both fixed and variable. Your fixed expenses are items such as rent, insurance, internet bills among others and these are often easy to track because they stay the same each month. Variable expenses are items such as groceries, entertainment, dining and fuel. You can track these by reviewing all your receipts or bank or M-pesa statements. Once you have a clear picture of what you spend money on, categorize them so that you understand what eats up most of your income, and what expenses you can eliminate.

Now comes the difficult part: building discipline. We live in a generation of instant gratification and it is hard to deny yourself certain luxuries. However, if you want to be stable financially, you must learn to curb your urge to spend. If you want an item you had not budgeted for or were not planning to buy and it is not a need, you can try the ‘wait three days’ rule and if the urge still persists then you can look into buying the item. Moreover, you need to forget about what other people have and live within your means. Trying to keep up with what your peers have will only leave you drowning in debt as you try to afford a lifestyle you cannot maintain. You also mentioned being generous and quick to lend anyone who borrows money from you. Kudos to you. It is a good trait to be kind and help people, but this should not be limitless, especially as you end up broke by the middle of the month. As you prepare your budget, set aside a percentage of your income for aid and charitable works and use that to lend to people. You should also learn to say no except when it is absolutely necessary.

Finally, invest. Like you said, you work very hard for your salary, so why not get the most use out of it? Investing helps your money grow over time. It also enhances your discipline by guiding you to set a certain amount periodically. It is advisable to take out the money for your saving goals before even paying your bills. From your budget, you can establish what you are able to save on a monthly basis. As a rule of thumb, you should use the 50/20/30 rule to save. This entails spending 50per cent of your salary on essential expenses like housing and food, 30per cent on discretionary spending, and 20per cent for your savings or investments. Money market funds are a good place to start your investment journey, because you can start with as low as Sh1,000 and you stand to earn interest of up to 11per cent.

Financial discipline takes time, energy and sacrifice to master, but your future self and family will be grateful you learnt it.

Felix Owuor.

Dr Pesa this week is Felix Owuor. He is part of the investments Team at Cytonn Investments.

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