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Maximizing the Effectiveness of Your Financial Resources to Build Wealth

April 13, 2018

“They say I should save more for retirement."

"They say I should save more for my children's college education."

"They say I should pay-off my credit card debt."

"So how am I supposed to do all those things? I am making more money than ever, and I feel poorer than ever. What can I do?”

The answer: You must find a way to maximize the effectiveness of your financial resources over time. In other words, you must figure out a way to do more with less. This will free up a portion of your income to save and invest over time which is the only reliable way to get rid of debt and build wealth. You need a carefully crafted, well-thought-out, spending plan.

In my practice, the first step of a financial planning engagement is to work closely with my clients to create a detailed, cash flow analysis. It is important that you understand with 100% certainty what it costs you to live during an average month in your life. This step will tell us where you are right now. The next step is to understand where you want to go. In other words, what are your specific goals for retirement, college, debt elimination, etc.? A specific goal has two crucial parts, a dollar sign and a deadline. How much money will you need and when do you need it? You must be clear and specific.

Once we understand where you are right now and where you want to go, we can create a plan to help you get there. That plan is called a strategic budget (spending plan). The planning process will likely require you to make some trade-offs. But here is the key, we must make your life work on paper. If we can make your life work on paper, including your living expenses, debt service, and savings goals, then there is a chance we can make it work in real life. Conversely, if we cannot make your life work on paper, then it will not work in real life. Hope alone, is a good strategy for building debt but not wealth.

Many people believe, mistakenly, that they know how to create a budget. My experience tells me otherwise. Because most people do not understand how to accurately project their living expenses, there are four types, they create what I call a “Trap Budget”. A “Trap Budget” is a budget that is based on inaccurate or incomplete information. It makes you think you have money that you don’t really have. When you try to follow that plan, you find yourself committing to things that you cannot afford and still save for your goals. Unfortunately, when money gets tight, the saving objectives are the first to be eliminated. As a result, your goals will be unmet over time. It doesn’t have to be this way.

In my view, budgeting is the most important financial skill a person can have. It is the very foundation for building sustainable wealth over time. Budgeting is the foundation for building the wealth you will need for retirement and beyond. During my 30 years in practice, I have never met a good budgeter with credit card debt and unmet savings goals. The good news is, budgeting skills can be learned rather quickly. Unfortunately, they can only be perfected with practice over time. That’s why I meet with my clients regularly over time to review their progress until they have perfected their budgeting skills.

My motto is: “Enjoy life and build wealth. You can do both, but you need a plan”. Don’t let your important goals slip away. Call me today for a free consultation.

Keith Donnell is a Personal Financial Counselor at ModernWealthConcepts LLC, Family Weath Planning. He is a Certified Financial Planner Practitioner with over 30 years of experience helping highly employed individuals and families achieve their most important financial goals over time. Keith does not sell investments or insurance products only financial advice and guidance. He can be reached at