What is the meaning of discipline? You can look it up in the dictionary, you can ask twenty of your best friends, and you can find it on every school age athlete that wears his football t-shirt from last year. The word is thrown around everywhere you go and, at least in my experience, we look at what it means from an emotional angle but not a realistic or objective way.

Today, I want to use this word in the context of your finances. What does it mean to hold financial discipline? For those who have achieved the financial freedom that you wish you had, what are they doing or what did they do to get there?

Things the Wealthy Know

Would it surprise you to know that the #1 and #2 things that the wealthy do are things that require no education, no high paying job, and no specialized skills? That means that you can do it too!

First, they know that they must stay disciplined by staying out of debt. When I eat a lot of fatty foods, I know that my waist line is going to pay. My lack of discipline is going to cost me. When you are in debt, it costs you. You pay money, often a lot of money, to be in debt.

Lots of Interest

On just $4,000, you could pay more than $30 per month in interest. What would you do with an extra $360 a year? Over the course of 30 years, that is nearly $11,000. If you would have invested that $360 each year, you would have made at least 3% annually compounded. How does an extra $20,000 sound for retirement? (Depending on the type of investment.)

Most people have much more debt than that. Statistically speaking, there is a good chance that your credit card debt is over $10,000. With a little financial discipline, you could have more than $60,000 extra dollars when you retire by just paying off your credit card debt. That’s not even taking in to account the big house that you don’t need, the car loan, the boat, the expensive hobby, all the vacations on credit, you know where I’m going.

Here’s the bottom line. Don’t take my word for it. Do some research. The reason you aren’t as rich as you want to be is because you are in debt. Debt costs a lot of money. Warren Buffet, the greatest investor of our time said recently, “I would be poor and my company bankrupt if I was borrowing money at a 20% interest rate.”

Financial Discipline is a Full-Time Job

Here’s where the discipline comes in to play. I have seen numerous articles from “experts” who say that during a down economy you should stop try to pay down your credit cards and save your money. They say that you may need that money in the future.

Here’s my answer to that: Continue paying down your credit card debt and if you find that you need that money in the future, charge it to your card. The undisciplined money manager doesn’t let circumstances sway them from the goal.

As I write this, we’re still in the grasp of an economic downturn. Nearly 10% of our population is out of work and millions are filings for bankruptcy. The only debt I have in my life is my home. I have not felt any financial crunch from the recession and if I did lose my job, I have enough money saved that I could support my family for almost a year without working. I have taken the money that I used to pay in interest and deposited it each month. Debt equals freedom.

What was the second thing that the wealthy did to get wealthy? They were patient. Accumulating money takes time so for every dollar you save, give your self a pat on the back. Be proud of yourself. You did good today.

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