Financial Discipline Begins with Personal Discipline

You’ve heard the saying, you can’t love others until you first love yourself. The same can be said of your personal finance: You can’t have financial discipline if you don’t have personal discipline.

A new study by CareerBuilder shows that 78% of Americans live paycheck to paycheck. Their survey of 3,462 full-time workers and 2,369 full-time employers showed people struggle to make ends meet even at higher wages. People earning over $100,000 (9%) were living paycheck to paycheck; 28% of those making $50K to $99K do too.

The big problem is behaviors that lead to debt. 71% of those surveyed had some kind of debt and 56% said they would never pay off their debts. The same percentage (56%) save less than $100 per month.

Brittany Jones-Cooper at Yahoo Finance reported on the survey and interviewed a financial planner. He said the first step is to look at non-monetary factors like shopping and drinking in bars to “relieve stress.” The Yahoo story offers a bulleted list of ideas to consider, but it boils down to take personal responsibility. For the most part people don’t live paycheck to paycheck because someone else is not paying them enough. It’s because they are spending too much.

The solution is to create a budget to understand where your money is going. Then develop a plan to cut back the bad habits. You need to have personal discipline to stick to that plan. In time, you’ll learn to live within your means and save at least 10% of your income for the future. It’s all covered in Chapter 3 of Basic Personal Finance.

4-Year Degree Isn’t Only Path to a Good Job

I tweeted this, but I wanted to add a link to the blog so it would be searchable on the site. Gail MarksJarvis had a great column in the Chicago Tribune talking about all the good jobs available without a 4-year college degree. It’s based on a Georgetown University study that found 30 million jobs that don’t require a bachelor’s degree and pay an average of $55K a year.

A great line from the column: “28 percent of people who get associate degrees from community colleges end up with better jobs than those with bachelor’s degrees.” I suspect a lot of that has to do with what these people studied in the bachelor’s programs.

Things not to study (BA with poor pay) : communications, art, psychology

Things to study (AA with good pay): nursing, computer specialist, mechanical technician

Other good fields (didn’t mention pay): welder, plumber, HVAC maintenance, electrician, carpenter, bookkeeper, food service manager, security guard, industrial production manager

Classes just started again across the country. Make sure you’re studying something that’s good for your financial future.

Non-Financial Rules for Financial Success

In my book Basic Personal Finance, I listed Ten Rules of Thumb for financial success. After that list, I said there are “non-financial rules that have an even bigger impact on whether you live a successful life (e.g., don’t do drugs, don’t get arrested, etc.).” In the back of my mind was a very short list of things I was thinking about, but thought might be too controversial for a finance book. That list was:

  • Don’t do drugs
  • Finish high school
  • Don’t have kids until you’re married

The original person who said that claimed following the list would almost certainly keep a person out of poverty. At the time I wrote the book, I didn’t realize that a similar list was published by the Brookings Institution in 2013, “Three Simple Rules Poor Teens Should Follow to Join the Middle Class.” Their version:

  • Finish high school
  • Get a full-time job
  • Wait until age 21 to marry and have kids

If it was said by Brookings, it must not be that controversial. Plus their list is backed up with research. The article says only 2 percent of adults who followed these rules are in poverty, and 75 percent joined the middle class (earn $55,000+ per year). They don’t say what happened to the rest.

I still like the first list better. After all, doing drugs will make it difficult to keep a full-time job (not to mention the unnecessary expenses of paying for the drugs). Maybe a fourth item for “don’t commit crimes” would also be good to put on the list.

The point is people have the power to get themselves out of poverty, and it has nothing to do with knowing personal finance. The list is short and simple. Unfortunately, as the Brookings article says, following that list is more difficult for people already in poverty, mainly because no one ever tells them how simple the list is.