Friday, October 31, 2014

Financial Discipline

Discipline is defined as control that is gained by requiring that rules or orders be obeyed and punishing bad behavior…

Financial discipline is a discipline concerned with determining value and making decisions. The finance function allocates resources, including the acquiring, investing, and managing of resources.

Here are some suggested steps that can help you figure out your goal(s) and tactical steps to stay on target , or in other words practice Financial Discipline.

Step one:  What are your financial goals? 
Immediate – bills/expenses that must be paid within 12 months or less. 
Short term – goals for the next 5 years.
Long term – goals beyond 5 years, including retirement.

Step two:  Once the goals are defined a plan needs to be outlined.  It could be as simple as a quick budget consisting of your income and expenses.  This should help you identify any flexible items (perhaps additional income sources or expenses you can do without), which can be adjusted to help you reach the immediate, short, or long term goals.

Step three:  Practice ongoing financial discipline by following these tactical steps to keep you on track heading towards your goals.  While these steps are suggested in a certain format you can be flexible in allocating them on your calendar and choosing only those that apply.

January - Resolve to make yourself financially fit!

  1. Manage your debt. Start by paying off all of your high-cost, non-deductible credit cards, and other high cost debt.
  2. Establish an emergency fund equal to 3-6 months of expenses.
  3. Create (or update) your cash flow statement (income minus expenses) and statement of personal net worth.
  4. Give your portfolio a checkup-review the performance as you rebalance back to your target asset allocation mix.
  5. Double-check your employer retirement plan contribution percentage. At the very least, try to contribute up to the point where you take advantage of any available employer match.
  6. See the IRS Tax Calendar for federal tax items due throughout the year

February - Insurance and Tax Information.

  1. Check your insurance policies (property and casualty, liability, health, disability, life) to be sure you're not paying too much for the wrong kind of coverage.
  2. Annual tax forms 1099, 1098 and W-2 should be mailed to you by your various providers no later than January 31.  Get a head start on preparing your income tax forms.


  1. Free Annual Report, get a free annual copy of your credit report from Experian: 

April - File your Tax Return, contribute to IRA...

  1. File your income tax return by April 15. Even if you're requesting an automatic six-month extension, you still need to pay any taxes due by April 15.
  2. April 15 is also the last day to make a contribution to your IRA or Coverdell Education Savings Account for the prior year.

May - Inventory of your personal assets and Financial Disaster Plan.

  1. Create (or update) an inventory of your home and personal property. Use a video camera to make a record of your valuable possessions for insurance (and/or estate) purposes, and then store the video in a secure, remote location (like a bank safe deposit box).
  2. Create (or review) your financial disaster plan.

June - Mid-year financial check up…

  1. Perform a mid-year review of your finances to be sure you're on track.
  2. Planning a June wedding? Don't forget to update your financial plan accordingly.


  1. Free Credit Report; get a free annual copy of your credit report from Equifax:
  2. Keep learning-add at least one good book on personal finance or investing and a publication such as Forbes, Wall Street Journal, or Financial Times to your summer reading list. 

August - Review your vacation and holiday budget and plan for tax-deductible educational savings.

  1. Compare what you actually spent on vacation to the amount you projected in your annual cash flow plan. Start thinking about your holiday budget.
  2. As the kids or grand kids get ready for school, think about establishing or contributing to a Coverdell Education Savings Account and/or 529 College Savings Plan on their behalf. 

September - Estate Plan and Small Business IRA.

  1. Review your estate plan.
  2. If you want to establish a SIMPLE IRA this year for your small business, the account must be opened by October 1 (this date may change visit or our website for updates).

October - Tax projections, open enrollment season, and more

  1. File your income tax return by October 15 if you requested a six-month extension back in April.
  2. Run a projection of your current-year income tax liability to get a head start on your year-end tax planning.
  3. As open enrollment season rolls around at work, take the time to review your health insurance coverage and other employer benefits.

November - Free credit report, holidays, and charitable giving…

  1. Get a free annual copy of your credit report from TransUnion:
  2. Don't charge more for holiday gifts than you can comfortably pay for in full when the January credit card statements come around.
  3. Take time to give thanks for another year of financial success. Review your charitable giving plans and consider making tax-deductible gifts to charity or to a donor advised fund account before the end of the year.

December - Portfolio review for tax-deductible losses…

  1. Check your portfolio again for loss-harvesting candidates, as you rebalance back to your strategic, long-term asset allocation.
  2. If you want to establish an Individual 401(k) or other QRP (qualified retirement plan) this year for your small business, the account must be opened by December 31.
  3. If applicable, don't forget to take the annual required minimum distribution from your IRA by December 31.
  4. Request your annual Social Security benefit statement from Compare your earnings record against your old tax return info for accuracy.

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