A Cheat Day Once in a While is Just Fine, whether it’s Dieting or Financial Planning!

Reaching out for a box of sweets after a tiring day, or having an extra slice of cake on a special occasion. Sounds familiar? People trying to follow a strict diet may curse themselves to even get such thoughts. While it may not help their cause if it becomes a habit, indulging once in a while should not make you feel guilty. It takes time to build discipline in any area of life, be it your diet, well-being or finances.

Financial discipline is the ability to stick to your spending, saving and investing plans to achieve your monetary goals. It is not easy to follow the plan flawlessly from day one. Financial discipline is built with small concrete steps over time that become second nature to us. Trying to change your financial habits overnight can lead to frustration and disillusionment. A better way is to bring about habitual changes to allow an occasional ‘letting go’ like the concept of ‘cheat day’ in dieting.

The Art of Setting Realistic Financial Goals

Be it money or calories, setting lofty goals at the beginning can get in the way of achieving your goals. For instance, a plan to drastically cut the intake of calories or depriving yourself of everything you like to eat to achieve your weight goals can lead to an abrupt ceasing of your efforts and result in binging. Similarly, an extremely tight budget from day one can shake your resolve and may even result in unnecessary splurges. Start your financial journey by setting realistic goals. If you are a person who buys branded clothes every weekend, reduce it to once a month. If you are new to investing, set aside a small percentage of your income to invest to begin with. Start your investing journey by investing in a mutual fund scheme by taking help from an expert. Start with smaller targets. Once you achieve it, you will be motivated to challenge yourself with bigger targets.

Be Consistent

Discipline is all about building a habit. Regular investments are more important than the investment amount. One of the easiest ways to invest consistently is through a Systematic Investment Plan (SIP) in a mutual fund. Most mutual funds allow a minimum SIP amount of ₹500. Of course, as you move along your investment journey, increase the proportion of the income invested. Remember, SIP debits are automated, thereby a higher chance of staying committed to your long term goals.

Discipline pays in the long-term

Make your money work for you. Allocate a sizeable chunk of your portfolio in equity-oriented mutual funds which have the potential to earn a higher rate of return. Take help from a professional who can help you with your risk profiling. Leverage the power of compounding by investing as early as possible and stay committed to your financial goals. The earlier you start, the more time your money will get to work for you.

For example, if you invest ₹1,00,000 today, it would have grown to around ₹2,15,000 after 10 years (assumed rate of return @ 8% p.a.). But if you had invested the same amount 10 years earlier, your corpus would have grown over ₹4,60,000, assuming you do not withdraw.*

Reward yourself – Cheat Days are Just Fine!

Financial discipline is not all about burning the candle at both ends. Just as cheat days or treat days in a diet plan make people feel better and stay motivated, reward yourself when you reach milestones along with your financial journey. Celebrate with a new pair of shoes or a weekend getaway. But do remember, people on a diet indulge in their favourite foods mindfully. Similarly, find ways to spend within your means.

Financial discipline is sticking to the plan, tweaking it as you progress and being nice to yourself. If you have stayed on course and achieved certain milestones, reward yourself. Your mind will perceive that good things come with hard work and you will be motivated to continue attaining your next goals.

* This is just an illustration with assumed rates to explain the power of compounding. Returns are neither indicative nor guaranteed.

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