Key to Building Wealth: Discipline

I've written several times about how discipline is the key characteristic to building wealth. Some examples:

• Discipline is Vital for Financial Success


• Discipline Leads to Wealth


• Discipline: The Missing Ingredient in Many Financial Plans

Recently the blog of Dr. Thomas Stanley (author of The Millionaire Next Door) succinctly wrote about why this is the case:

Success in life and in work has been consistently tied to conscientiousness: being disciplined, having plans and focusing on details. Research in psychology consistently shows a relationship between this personality characteristic and how well someone will do on the job. Likewise, the research conducted on those with high net worth over a period of 30 years also provides insight into why they are balance sheet affluent – they have a long-term, disciplined approach to saving, spending and investing. These individuals are not distracted by what others are doing (e.g., the Joneses).

Here's a short list of all the things it takes discipline to do:

• Spend less than you earn.


• Work to grow your career.


• Earn money over and above your job.


• Save, save, and save some more.


• Make investments that grow over the long term.


• Avoid bad money mistakes that can kill your finances.

In other words, it takes discipline to accomplish all the key steps that lead to growing your net worth. I think this is why so many Americans are in rough financial shape -- because they have little or no discipline when it comes to handling their money.

A lack of discipline is not the reason all people are in tough spots for sure (for instance, many disciplined people have been hit hard by the economy), but on average we live in a pretty discipline-less society. We want it all, and we want it now. Forget discipline -- give me what my neighbors, co-workers, relatives have -- or better/more than what they have.

Ugh.

But discipline is certainly the key to wealth. If there's a young person reading this today, know that if you apply discipline to how you handle your money, odds are that you will become wealthy over time. Good news: the steps (above) to take are simple. Bad news: they aren't easy.

And while discipline isn't easy, I can testify that it is certainly worth the time, effort, and sacrifice. I'm sure many others reading this post will agree as I know several of you have taken the steps above (in one form or fashion) and seen the rewards of your efforts.

Comments

[Deny D. Ritz @ Building Wealth Tips]

Hi,

Thanks for this reminder. I agree with what you write that "discipline is the key characteristic to building wealth."

Recently I read "Working With the Law" by Raymond Holliwell. In that book he states discipline as one of the fundamental laws of success that people often put aside.

Of course, he doesn't mean the "punishment" type of discipline. He means the constant, persistent, and as you quote, conscientious effort to achieve our goals.

Do you have a link to Thomas Stanley's blog? I think I should subscribe to him also in my reader.

Cheers,
Deny

[mysticaltyger]

The recent book "The Longevity Project" found that they could predict who would live the longest based on who was rated as conscientious by their elementary school teachers.
It seems there's definitely a link between conscientiousness, health and wealth.

[FMF]

Deny --

I meant to include a link to it in the post, but I forgot. Anyway, I have added it now, just above the quote.

[Lance@MoneyLife&More]

I have remained disciplined so far and it is reassuring to read these articles. Sometimes it is tempting to slack off but I know better than that so I can keep my future bright!

[Erik]

I just had a discipline check yesterday. My wife and I both drive 10 year old cars. I really don't care and she goes along with it but has wanted a new car.

We are in the process of refinancing our house. I knew I would need to bring cash to the table to keep our LTV at 80%. (Note I cashed out equity up to 80% a few years ago to pay off two rental property mortgages for tax reasons.)

Yesterday my wife's car needed repairs and she had a "car meltdown". That was it, she wanted a new car now. Thankfully our 'gap' is large enough that we can save up quickly for a new car in cash. We have three options: Cancel the refi and buy car with cash, continue with refi and take out car loan, or continue with refi and push out car purchase for 6 months.

The details of my situation aren't really the point. My point is that your discipline is going to be challenged no matter what you think are your principles. I said that taking out a car loan was simply not an option. Even if we plan to pay back within a year, it goes against our approach of buying things AFTER we can pay for them. My wife knows how much money we'll save on the refi so she doesn't want to cancel that for getting a new car sooner.

Emotions are still running high in my house but I think we have passed the discipline test this time.

[Drew @ ObjectiveWealth]

Although difficult to achieve, discipline is needed at all times and in every choice and action in order to build not just wealth like you've described, but character too. I think you're right that all those money actions you mentioned are dependent on discipline.

[Old Limey]

Discipline is essential, but how about the two most important rules for building wealth.

............... 1) Understand the power of compounding.

............... 2) Don't lose money. A 50% loss requires a 100% gain just to get even again.

The words "Long Term" are widely used but rarely understood. The term must vary from person to person and be a function of their age, financial situation, and proximity to retirement.

For those, like myself, that have been retired for 20 years, "Long Term" is meaningless. The older you get, the more risk averse you MUST become.

[JayB]

I think another good part of learning discipline is that after a while it becomes a habit.

There are many things I don't even think about anymore that could attest to this. Things that I don't even really miss or need.

When I go to restaurants now, asking for water over a $2.50 tea or Coke used to be a thought process, but now choosing water is automatic.

[Peter at Savings Bond]

Great article, would just add that there is a danger in focusing exclusively on discipline is that one may be disciplined for the wrong things. Instead, a solid "mechanical" foundation is needed on the ideas for building wealth first. Then a plan should be created to further those goals. Finally one must use discipline to see that the plan is carried out.

[Kelly@FinancialBailoutNews]

As a young person reading this, I will take this advice and do my best to live by it. Discipline is the hardest thing to abide by in every area of life. That's why so many people are overweight, lazy, unemployed or poor. Discipline is the key to being successful and prosperous in all areas of your life, but its easier said than done. Weighing the wants vs. needs will definitely be where I will think long and hard about financial decisions.

[Alexander Berger]

I am one of those "young people" you mentioned and I hope you are right. It does seem that patience and hard work are very important to succeeding in life but luck appears to play a part as well. So far I've been getting pretty lucky, but you never no, streaks can end :)

[Melissa@LittleHouseIntheValley]

Discipline is tough, especially when you have no role models to follow. Find one role model who is living a disciplined life, and it becomes easier to live that way.