When I think of Grace and punishment/correction/discipline (however you want to call it), I think about Titus 2:11-12
11For the grace of God that bringeth salvation hath appeared to all men, 12 Teaching (paiduo - chastening) us that, denying ungodliness and worldly lusts, we should live soberly, righteously, and godly, in this present world;
Here are some other scriptures with the word "paiduo" so you get a sense of it:
- Pilate talking about Christ: (Luke 23) 15"No, nor has Herod, for he sent Him back to us; and behold, nothing deserving death has been done by Him. 16"Therefore I will punish (paiduo) Him and release Him."
- (Hebrews 12) 6 For whom the Lord loveth he chasteneth (paiduo), and scourgeth every son whom he receiveth. 7 If ye endure chastening, God dealeth with you as with sons; for what son is he whom the father chasteneth not? 8But if ye be without chastisement, whereof all are partakers, then are ye bastards, and not sons.
Grace is about more than forgiveness but about instructing us, through chastening, on how to live the way God wants us to live. For that reason, IMHO, there is really no need to balance Law with Grace when it comes to what God does when believers err. Grace is sufficient even for our chastening.