The Gift Of Personal Financial Discipline

The gift of a purposeful life is priceless. But that does not mean you live in a state where there is no mundane work. The life we live consists of moments which have to be lived and we have to work each moment. We may like or dislike the work we do but we have to work.

na hi kascit ksanam api
jatu tisthaty akarma-krt
karyate hy avasah karma
sarvah prakrti-jair gunaih

All men are forced to act helplessly according to the impulses born of the modes of material nature; no one can refrain from doing something, not even for a moment.

Sri Krishna in the Bhagavad Gita

So we have to work and we have to work in all aspects of our life. There is no getting away from it. This applies to our personal financial life also. We all go to work every day and for the work we do we earn some money. The way we manage the money we earn will lead us to live a life of well-being or lead to us to live a life of worry and discomfort. How to manage our personal financial life with discipline?

This framework is helpful: Consider your personal financial life a business. A business has three financial statements. So your personal financial life should also have three personal financial statements:

Cash flow statement: Your financial past
Balance sheet: Your financial present
Budget: Your financial future


We all know this well. This is not rocket science. But we do not do this. Why don’t we do what we know is good and useful. We are not taught how to be productive in a scientific way. When you look at productivity we mean that we know what we want and make progress towards getting that. This means you should manage your motivation, how you communicate with yourself and others effectively and how you actually do things effectively. Then doing things we should do will probably become easier. Jim Stovall wrote about this in his book and you can find how to find your profile here. The password is 586404.

The other thing one should remember is there are two attitudes which are very important: self-discipline and delayed gratification. If you learn this when you are kid and carry it out all your life, you will have a better life. The marshmallow study demonstrated this.

The three financial statements are easy to generate:

  • Personal cash flow statement: Look at how you have spent your money over the past year or month. You can do this using online tools or using your recent bank statements. Then categorise your spending: where exactly have you spent your money. Doing this can be eye-opening.
  • Personal balance sheet: List your assets and their value. List your liabilities and their value. Assets minus liabilities is your net worth.
  • Budget: You can budget only if you know what your personal cashflow statement is. Once you have your personal cash flow statement for a year, you can see how and where you spent your money and then budget. When you make a personal budget, you need to allocate every dollar or rupee that you earn to a budgetary category. Fixed and variable expenses all should be accounted for.

You can find a template for the above financial statements here.

What are the best resources for budgeting. There are a lot of resources online. I use Budgetpulse. Mint is good for those who live in the US and Canada. Both are free. costs around $60 and has rave reviews and can be considered if you are willing to spend $60 for this.

The key to success in your personal financial life is to manage your personal cashflow so that you have a lot of savings left which is then added to your balance sheet. The savings in your balance sheet should then be spent in creating assets that will grow in value and have some emergency savings. The key to all of this is to have a budget and stick to it.  As you can read below, the key is:

The art of living easily as to money is to pitch your scale of living one degree below your means. – Sir Henry Taylor



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