6 Tips on How Young Investors Can Be More Disciplined in Their Financial Life

Being a young investor and fresh in your financial journey, you are full of vitality and energy. However, this exuberance does not sustain for long. A successful investor is disciplined in following a set & proven process over and over again. As you become disciplined in your financial life, you increase the probability of achieving your chosen financial goals. Today’s article focusses on some tips which can help you become a more disciplined investor and positively impact your financial life.

#1: Make a budget and track it regularly:

Making a simple monthly budget is the most basic yet powerful way to get a grip on your finances. You basically list down what comes in, what goes out, and what remains. This helps you get an excellent idea of how much you can save per month and helps you set a target for savings. Once the budget is in place, it is effortless to track it month on month to know your gap areas. As you do this exercise over a few months, you will be more aware of your spending patterns and wasteful habits. This awareness will then help you become more mindful when you wish to take that vacation or buy that new expensive gadget.

#2: Pay your bills on time:

As a young investor, the stress and deadlines of work and hectic social life can cause you to miss deadlines for paying bills, be it loan EMIs or for credit cards or utilities. Missing the timeline can cause you to pay penalty charges and suffer from disruption of services. Still, more importantly, it can negatively impact your credit score. A low credit score can do long-term harm to your ability to get new loans. So, you must be meticulous in your bill payments as an investor and consumer. The best option is to set up a standing instruction to your bank account so that you free yourself from the time and effort in manually tracking the payments.

#3: Put your investments on autopilot:

The best way to get into a habit of regular investing is to remove the manual effort involved. When you invest manually, several factors at the time of investing may come in the way. It can be the noise regarding the market levels, performance of that particular scheme, discretionary expenses coming up, etc. The best way to put your investment plan on autopilot is to identify 2-3 good mutual fund schemes and start a SIP in those schemes with a standing instruction to debit the amount from your bank account at the start of the month. Why start of the month? Because once this happens, you are clear on the amount left available for your day-to-day expenses. This will also help curb any tendency of making unnecessary purchases that happen when money is lying idle in the bank account.

#4: Increase your SIP every year:

Most of the investors who look back on their early investing days regret that they did not proactively increase their SIP investments with the increase in their income. Had they done so, the additional investment every month could have made a significant difference in their total investment corpus as of date. The risk in not proactively increasing the SIP amount every time your income rises is that you’re leaving the possibility open for wasteful expenses. If increasing the amount in individual SIPs feel cumbersome, you can also explore starting a fresh SIP for the incremental amount in another good scheme.

#5: Make a financial plan:

Making your own financial plan is not rocket science. It just requires a basic knowledge of MS Excel and a basic template (lots of them are freely available on the internet) and customise it as per your specific requirements. A financial plan is a comprehensive exercise that involves goal setting, asset allocation, creating goal wise portfolios and a monthly investment plan. Basically, you get to see a complete picture of your financial life in front of you. Though it involves a considerable one-time effort, it is well worth it as you get a lot of clarity on your finances. You can then, at a fraction of time as compared to creating the original plan, track the performance of the plan periodically and make the changes as necessary.

#6: Make a personal finance reading routine:

As the legendary Warren Buffet said – “The best investment you can make is in yourself”. Books can provide a great deal of knowledge from the comfort of your home. It is like a conversation with the finest minds right in your living room. Make a plan to read good personal finance books and magazines to increase your knowledge in this domain. If reading is not your cup of tea, you can consider listening to podcasts or audiobooks. Over time, you will be surprised to know that the little time you spent every day or every week really paid off by helping you save yourself from costly financial mistakes. You also start getting recognised and considered as a personal finance wizard in your circle of friends. Now that’s a bonus, isn’t it?

Conclusion

As they say, discipline is the bridge between goals and their accomplishment. A disciplined investor can convert his financial goals into reality. Simple steps like sticking to a budget, drawing a financial plan, sticking to SIPs no matter the market levels are some of the traits that separate a successful investor from others.

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