Financial Literacy

Get Disciplined: Take Control of Your Finances

Get Disciplined: Take Control of Your Finances

Last Monday, I shared with you the first step towards getting financially literate is setting authentic goals. Today, we’re going to focus on getting disciplined and putting you back in control of your finances. Too often we relinquish our decision-making power to others or to our emotions. Sometimes this happens without us even realizing it.

Goals play a significant role in keeping you on track because now you know what you’re working towards, which can help guide your money decisions. However, goals alone are not enough. Being disciplined works hand-in-hand with your goals to help you achieve the life you want for yourself and your family.

4 Steps to Regain Control of Your Financial Life

We don’t intend to give our financial control away, but we still do. Sometimes we get caught up in playing “keep up” with our friends and co-workers or we let our emotions take control by telling ourselves “we deserve it” and spend mindlessly. Now it’s time to ditch those old habits and beliefs and stay true to what we want.

Utilize Credit Cards Properly and Eliminate Debt

Credit cards are not bad, but they are easily abused. Many people treat them as lifestyle extenders, which is a fancy way to say they can be debt creators when you lack discipline. Credit cards are a tool and when used properly, they can be a great asset. They can help you track spending and earn valuable reward points as long as you remain in control of your usage by following a budget and paying your bill in full every month.

It’s time to eliminate your credit card debt if you truly want to be in control of your finances. Review your debt and see what your triggers are. And be specific—not just living beyond on your means. How are you living beyond your means? Were you spending mindlessly? Buying things to make yourself feel better? Trying to keep up? Once you understand your triggers and your spending habits, you are better prepared to respond differently when those situations arise, rather than spend money you don’t have.

Build Your Cash Reserves

Many people lack an adequate cash reserve. We live paycheck-to-paycheck, so we are unprepared when emergencies (or opportunities!) arise, so we wind up using our credit card to cover those expenses. We do this again and again. Life happens; I get it. The best way to handle life’s curve balls is to be prepared. Now you can remain in control and make decisions without sacrificing your goals. Ideally, a cash reserve should cover 6 to 12 months of expenses.

A common mistake is sacrificing your cash reserve to speed up your credit card repayment efforts. Instead, you should actually be building your cash reserve while you eliminate your credit card debt. Sound impossible? It’s not. However, it does take work and discipline.

It’s not always easy to see money sitting in a savings account earning pennies when you are paying interest on your debt. Remember your cash reserve or emergency fund has a valuable and specific purpose: to help you pay for emergencies without creating new debt. I have seen people work so hard to reduce their debt, then give-up after an emergency forced them to use their credit card, wiping out all their hard work. Don’t let that happen to you. Create a reasonable cash reserve for your personal situation, taking into consideration your debt and job security, that will give you peace of mind and cover emergencies as they arise.

Make Saving and Investing a Priority

We have many reasons why we wait to save money, including the popular, “I don’t make enough money and cannot save” excuse. Or we assume someone else is going to save for us, (maybe an inheritance or Social Security). The question we need to ask ourselves is—do we want to depend on someone else for our financial future?

I’ve never had anyone tell me they regretted starting to save or invest their money. So why aren’t we saving more? We prioritize instant gratification over our future because we think short-term instead of long-term. Don’t make that mistake. It’s easy to get started, and one of the greatest gifts you can give yourself. You took the time to create those goals, now you need to save and invest appropriately to make them a reality. They will not just happen because you set them. Reviews your goals regularly to make sure you are on track.

Protect Your Family and Dreams

Insurance is topic that many people dread. We don’t always like facing our own mortality. I want a long life with my family but also want the peace of mind that my family will still be okay if the unthinkable happens. This is why insurance is so important.

Life Insurance: We often select an arbitrary number that feels comfortable in a life insurance policy offered as part of our employee benefits plan, which is generally not portable should we leave our employer. Death makes us uncomfortable, so we avoid the hard discussions of what would actually happen if we die or our spouse dies prematurely. You cannot pick a random number. You must determine what amount of protection is needed to cover lost income and to continue living the life you planned.

Disability Insurance: Just over 1 in 4 of today’s 20 year-olds will become disabled before they retire according to the Social Security Administration. Disability, whether short-term or permanent, is expensive and rarely planned for. The lives we lead and the dreams we have for our future depend on the money we earn and save from working. Even a short-term disability can seriously derail your ability to reach your goals. Make sure protect your goals with adequate disability insurance.

Money Smart Individuals Are in the Driver’s Seat

A lot of people financially live in neutral and sometimes even in reverse. Financially literate people are firmly in control of their finances and moving full speed towards their goals. What are you doing to take control of your finances?

Shannon

Photo courtesy of www.FreeDigitalPhotos.net.

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April 14, 2014  •  40 Comments  •  Financial Literacy

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  1. Monday, April 14th, 2014
    Credit cards can be used responsibly but we just had to get rid of them to develop the discipline we needed. As long as we had one the temptation to use it was too great. We really developed discipline when we went to a debit card and cash system for payments. It forced us to spend only what we had.
    • Shannon Ryan
      Monday, April 14th, 2014
      Absolutely! Sometimes you need to eliminate that temptation to get back into control. It's great that you recognized you needed to do that and developed the discipline you needed. When you do only use cash, it does force you to slow down and think about purchases. Credit cards can too easily be used as a crutch for people. A way to say "yes" when they should say "no".
  2. Monday, April 14th, 2014
    Well I definitely can't disagree with the four things you offered up in this post. It's hard to get ahead and feel financially stable when you have credit card debt looming. I also think having a cash reserve is extremely important, even if it is getting almost no interest sitting in a savings account. Great advice, Shannon!
    • Shannon Ryan
      Monday, April 14th, 2014
      Thanks, DC! It is very hard to feel financially stable and able to get ahead when you have credit card debt breathing down your neck. So many people overlook cash reserves but if you want to be in control, you need one. Otherwise you once again are at the mercy of your credit card.
  3. Monday, April 14th, 2014
    Great post! It does take some discipline to make positive changes but those changes can be addicting. I love being in as much control as possible.
    • Shannon Ryan
      Monday, April 14th, 2014
      I agree, Holly! Once you truly have control over your finances, you realize how powerful it is and how good it feels to be in control. It definitely makes it worth the hard work to make positive changes.
  4. Monday, April 14th, 2014
    Good post Shannon! Those triggers, whether they're causing you to do or avoid something, are vital to know. By knowing what they are you can better see what you need to do in order to avoid them and act responsibly in terms of your finances. That discipline can be difficult to establish, but once you can get it done it's well worth the effort you put in.
    • Shannon Ryan
      Monday, April 14th, 2014
      Thanks, John! People don't always want to take the time to determine what their triggers are but it's an important step. You need to know what causes you spend or avoid taking action that you should. Otherwise you'll just repeating those mistakes. It definitely takes effort to be disciplined but it is worth the effort once you realize how good it feels to be in the driver's seat.
  5. Monday, April 14th, 2014
    Great reminder post, Shannon. Most of us get off track at some point during on our journey to become financially free, and having things to constantly bring us back on track is critical to success. I'm such a huge fan of goal setting and living intentionally, and this post gets to the heart of it all. You have to manage your money well and plan ahead to get ahead.
    • Shannon Ryan
      Monday, April 14th, 2014
      Absolutely! I'm a big fan of intentional living too. It is to get off track, which why it's so important to review our goals and track progress so we catch ourselves before it's too late.
  6. Kathy
    Monday, April 14th, 2014
    I caught the sentence about deserving things. Unfortunately, we are bombarded daily about how we deserve things that perhaps we can't afford. We deserve a nice car. We deserve a nice house, We deserve health care. We deserve to eat out, go to bars, have nice clothes and on and on......I'm not surprised that people buy into that when even our government tells us that we work hard so we deserve all these things. Guess what? If you haven't earned it, you don't deserve it. But it should be an incentive and a goal to work toward. People who make debt elimination one of their financial priorities will succeed.
    • Shannon Ryan
      Monday, April 14th, 2014
      Very true, Kathy. A lot of us take those messages to heart and believe them unfortunately. We do deserve great things but we also have to work hard for them and figure out where our priorities lie as well. Wanting things doesn't make them a reality and buying things we want that we can't afford creates more problems in the end.
  7. Monday, April 14th, 2014
    Good tips. It is very difficult to save and pay off debt at the same time, but it can be done, it may be slower going on both ends, but it's important to have at least a little saved up. I am shooting for $1k for an emergency fund, like Dave Ramsey suggests. I will be building savings and investments significantly more after the debts are paid off. I can't wait! I have been playing with a debt repayment calculator to find my potential debt-free date and it is encouraging!
    • Shannon Ryan
      Monday, April 14th, 2014
      Yeah! I'm glad to hear you're feeling good about your debt repayment efforts and calculating your debt-free date! It definitely takes discipline to save and pay off debt but both are important. And like you said, once you're debt is paid off, then you can really ramp up your saving and efforts efforts. But having a reasonable cushion can help you get out of debt because stuff always happens and being able to pay for it without creating new debt feels very, very good.
  8. Monday, April 14th, 2014
    Thanks for the reminders, Shannon! It especially hit home about the need to have insurance - live and disability :-) As we plan on starting a family, it's important for us to set both my husband and I up for any and all exposures and risks (My husband and my sister are both in Commercial Insurance and they analyze liabilities all day long! LoL!) Better safe than sorry is a great mantra.
    it's just another bucket for us to check in our financial prepared-ness list :-)
    • Shannon Ryan
      Monday, April 14th, 2014
      I'm so glad that you two are planning to add life and disability insurance to your checklist. It is a must-have, especially if you two are planning to start a family soon. You want the peace of mind that they life you want for your family can still happen even if they unthinkable does happen.
  9. Monday, April 14th, 2014
    "Utilize credit cards properly and eliminate debt". So true, Shannon!
    LOL, I wish I had a blog like yours to read when I was in college racking up cc debt! ;)
    • Shannon Ryan
      Monday, April 14th, 2014
      I wish I could have been there to help you too, Mackenzie! At least the both of us are here now to help others. :)
  10. Girl Meets Debt
    Monday, April 14th, 2014
    Great post Shannon! Right now I am doing step 1,2, and 3 simultaneously. Paying off debt/using credit wisely, still working on the EF fund AND saving for retirement too. Phew. Being a financially responsible adult is hard work. It's so worth it though. :)
    • Shannon Ryan
      Monday, April 14th, 2014
      Phew, is right, GMD! Being a financially responsible debt is hard work but it sure does feel good to be in control though!
  11. Monday, April 14th, 2014
    Sometimes it's so simple, yet so hard when our emotions get involved and we slip up. I feel like I've been a little slack this month...but I also know what it takes to get back on track quickly. Something I'll be touching on for the carnival on Wed. :)
    • Shannon Ryan
      Monday, April 14th, 2014
      Oh yes, we all slip at times but what is important is getting back on track. And you know how to do that and recognize the signs when you slacking off. Looking forward to reading your post on Wednesday. :)
  12. Monday, April 14th, 2014
    This is awesome!! I totally agree about the cash reserves. I have RARELY met a client who had an "appropriate" amount of cash reserves in my mind and I hate when they get so fixated on debt that they don't focus on the other side of the balance sheet. I know that debt sometimes makes people feel bad, but they feel so much better when they have more money in the bank.
    • Shannon Ryan
      Monday, April 14th, 2014
      Thanks, Shannon! It is very easy to get fixated on debt and fall into that mentality that cash reserves is a waste of money. But you and I know differently from a cash reserve or a lack of one can affect us. People forget that it has a purpose - to protect you. People understand why they shouldn't raid their 401k or retirement accounts to pay off debt and need to remember that an emergency fund has its own special and valuable purpose.
  13. Monday, April 14th, 2014
    We are paying off student loan debt and simultaneously putting money away in cash savings as well as retirement. Sometimes I wish we could put every penny towards the student loan debt and just be done with it but I think a balanced approach is definitley the way to go. I think I would be up all night thinking about the "what-ifs" if we didn't have adequate savings.
    • Shannon Ryan
      Monday, April 14th, 2014
      Yes, a balanced approach is definitely the way to go, Liz. You never know what life will bring you - in both obstacles and opportunities. Having cash to handle the what-if's puts you in control so you can make decisions that support your dreams and goals, rather than being forced to use a credit card (and create more debt) or say "no" to an opportunity you would really like to say "yes" to.
  14. Monday, April 14th, 2014
    That is a great analogy of being in the driver's seat. When you have tons of debt and no savings, it's more like riding the bus and you have no control over all the stops and starts. While I try to be a fan of public transportation, being the driver is really the only way to go.
    • Shannon Ryan
      Tuesday, April 15th, 2014
      The sad and hard part is how many people believe they are in the driver's seat when reality they are the passenger on bus. They are not in control but at the mercy of others. Once you actually take control, then you realize how powerful and amazing it feels to truly be able to choose how you use your money.
  15. Tuesday, April 15th, 2014
    I think that once you define all those authentic goals with clarity, all of these steps become so much easier. You don't think of them as sacrifices any more, rather, they are progress towards an end.
    • Shannon Ryan
      Tuesday, April 15th, 2014
      Absolutely, Stefanie. When you know what you want, it doesn't feel like a sacrifice or deprivation when you choose in favor of your goals. It feels good and powerful to know that you're taking steps to make your dreams and goals a reality.
  16. Tuesday, April 15th, 2014
    Using credit cards correctly for us means putting them behind glass, protected by an ear piercing alarm, only to be used in a complete nuclear meltdown emergency. There are people that can use them responsibly - I'm not one of those people. I prefer to use the credit cards that are green with pictures of presidents on them. :)
    • Shannon Ryan
      Tuesday, April 15th, 2014
      LOL! Nothing wrong with cold, hard cash. :) It's great though that you recognize that credit cards are a trouble spot for you. Like you said, some people can use them without overspending but for others they are like catnip.
  17. Kathy
    Tuesday, April 15th, 2014
    You are so right about eliminating emergency fund cash to speed up the credit card pay-off. I did that and it always comes back to haunt you. While paying off the card is great, it seems you always end up with some emergency that you then have to charge right back on the card. So you then have no emergency fund plus you still have the credit card debt. It is exciting to see that card balance go down, but just as important to see the savings balance go up.
    • Shannon Ryan
      Tuesday, April 15th, 2014
      You got it! That is the risk you take when you don't allow yourself a proper cash reserve or emergency fund. Stuff always happens and having to add new debt can be incredibly disheartening. It's better to have money set aside to take care of those emergencies without having to derail your debt repayment efforts.
  18. Tuesday, April 15th, 2014
    I love the part where you say that people never regret saving and investing enough - it's so true! We recently talked about life insurance - it's an 'icky' subject, but, like savings and investing, will surely give peace of mind! Great post as always, Shannon!
    • Shannon Ryan
      Tuesday, April 15th, 2014
      It's true! We more often regret waiting to start saving/investing but rarely regret every starting. Yes, life insurance isn't the most fun topic to discuss but I'm so glad you and B had the conversation!
  19. Thursday, April 17th, 2014
    Great article it clearly gives a step by step plan to get financial matters in order. On a macro level people know debt is bad, and they still continue to live with it, like it is a part of their money lives. I want to change how people view their cash flow. Thanks.
    • Shannon Ryan
      Thursday, April 17th, 2014
      Thanks! Yes, I agree. Most people innately know they shouldn't carry debt but they struggle to make the necessary changes. It's great that you want to help people change how they view money!
  20. Thursday, April 17th, 2014
    Keeping away from debt and having a good budget is very important to have a healthy finances. We have a good life insurance, it's very important especially when you have a daughter.
    • Shannon Ryan
      Monday, April 21st, 2014
      I agree, Marie! Keeping your finances in a healthy state and your family protected is so important. And it's not as hard as people think. :)
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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