It takes Discipline

3 Goals 3 Investments - health, wealth, happiness all have one thing in common - Discipline.

The Merriam-Webster dictionary defines discipline as:

- training that corrects, molds, or perfects the mental faculties or moral character

We have to train ourselves to be healthy and wealthy. And yes, sometimes even our happiness requires training.

Let’s discuss wealth first. Wealth absolutely takes discipline. Living within your means requires disciplined spending and saving. But what are your means? The best way to answer that question is to do a budget. Yes the dreaded B word!!! It amazes me how many people have never done a budget for their household. Think about doing one. Come up with all of your reasons why you haven’t done one yet and I will address them soon. Once you do it you’ll be surprised to see where all your money goes. You can then begin to live within your means. Once that is under control we can work on increasing your means.

At this time of year I am always reminded of another example of financial discipline. It’s tax time. Every year I am surprised to find people I know (smart people) who talk about the big tax return they got back from the government. I hate 0% loans and I especially hate loaning my money to the government for 0%.

I know, it is no fun to have to write Uncle Sam a check at the end of the year but either way it is your money. You can either keep it all year long and then give it to the government in April or they can take it every month and give it back to you at 0% return. That’s a bad deal. It takes a little work to get it right and it takes a lot of discipline to save the money all year long so you have it a tax time, but it pays over time.

This kind of thinking also helps you develop overall good money habits.

To adjust your tax withholding, you need to adjust the number of exemptions you claim on your W4 form. You need to do this conservatively at first because if you end up owing the government too much money at the end of the year then you will have to pay a penalty. Make the W4 form adjustment and then check your paycheck for the next few months. You will be able to see how much less federal tax was withheld. If that amount (for one month) time 12 equals less then the amount of money you got back the previous year then you are good. You’ll get less back this year and have more in you check every week.

Here’s an example (the numbers are for illustrative purposes only):

In 2008 you got a $3,000 tax return. So this year you increase your W4 exemption by 1. The next pay period shows that $80 less was withheld. Take $80 time 12 months and that equals $960. All things being equal, you would receive a $2,040 return this year. That’s $3,000 - $960. You could, in theory, increase your exemptions by a total of 3. This would result in $240 less in withholding. For 12 months that would be $2,880 and, again all things being equal, you would only get a $20 refund this year.

This is why you’ll need to take a few shots at this and fine tune your W4 until you get to a number you are comfortable with. Also, keep in mind that if your income changes (up or down) you should do this exercise again.

This is relatively easy to do and it gets you to start thinking about money in a new and better way. And remember, when you do this, be sure to save that extra money. You can not go out and buy a more expensive car or take that big vacation.

At least not yet!!