Financial Discipline is simply garnering the emotional strength and understanding of basic accounting fundamentals in order to make accurate decisions on expenses and investments opportunities.
Money has a strong correlation to Financial Discipline. In the world we live in, money is the medium of exchange for all products and services, providing a concept of value. We exchange money intangible and tangible form such as paper and electronically, and as such, the perception of value is the key factor for any “currency “ or transaction system.
Therefore, the management of money is the compass to financial freedom, which is the ultimate goal in our endeavors to attaining a comfortable life.
Financial Discipline = Financial Freedom
As stated previously, Financial Discipline requires a strong state of mind. It involves an internal control of greed, fear and impulse in the process of financial decision making. For example, prudent decision-making skills will be put to the test when prioritizing investments-should you first purchase a car or a house? Your financial expertise and mental fortitude will be evident in the resulting decision. While neither one of your choices can be right or wrong in general, depending on your financial status, only one of these can be the right option for you, since the desires we have must match our financial capacity. Grave issues can arise in the future of our personal financial situation if there is no commitment to the required income allocation for future needs.
Basic financial know-how revolves around understating two main Concepts – Assets and Liabilities.
One must keep in mind that Financial Discipline will create a path to achieve one’s materialistic desires. No desire is right or wrong as long as Mother Nature and fellow human beings are not harmed in the attempt to satisfy such needs. It is the will of the human spirit and the sacrifice of “instant gratification” that creates a path for financial freedom through financial discipline. Financial Freedom secures true freedom in this materialistic world. It means simply earning an income that outperforms your expenses. Once you possess the necessary financial freedom, it opens up opportunities and privileges that result from an increase in time to think, grow spiritually and explore life.
So, let’s look at some KEY TERMS that will be useful in the path to Financial Freedom.
What is a Financial Asset ?
An Asset is a source which generates a cash flow that adds to your income.
What is a Liability ?
A Liability is a payment for an asset or expense from your income.
The flow of money creates income.
The management of income, the control of emotional impulses mainly in relation to expenses and investments are the fundamental elements of Financial Discipline.
The Balance sheet consists of 4 key factors:
This is common to an individual, company, conglomerate or country. These are the four basic tiers that one must be familiar with in understanding Financial Discipline.
Always Remember ;
Assets create Income.
Liabilities create expenses.
Choose between them wisely.
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