If Saving Money Is So Easy, Why Are So Many Failing?

Strategy is all about creating a solid foundation from which you can operate. In a figurative way developing a sound strategy is a kin to learning a fundamental rule of martial art. The lower your center of gravity, the better your balance. In finance, lowering your tax liabilities creates better financial balance. Martial arts instructors teach their students the best practices of their art to ensure the student reaches his or her goal of becoming a black belt. In the same way, a financial stability life coach teaches his or her clients best practices to ensure the client can achieve his or her goals of building wealth.

Recently I was asked "Is there a “best practice” for setting up a wealth building strategy?"

Absolutely. Always think tax-favored first. Take advantage of any company sponsored retirement plan with a matching contribution. Start by contributing up to the company match amount. If a company matches 4% of your income, start with contributing 4%. Then, if you have the ability to have an IRA, consider the type of tax treatment you need in your present circumstances and fully fund an IRA. Contributing to a Roth IRA incurs a taxable event now. Contributing to a traditional IRA shifts the tax treatment to the time of withdrawal. Finally, if you have additional financial resources and you want to build up your retirement savings, go back to your company sponsored retirement plan and increase the contribution percentage.

In my book, Simple Wealth Building Strategies, I discuss the strategy for building a comprehensive asset management plan. In it, I discuss the process of “employing” your money. In other words, to employ your money is to hire it to work for you. You want to have a final financial goal that states “My money makes more for me than I make for me.” Dave Ramsey calls this the pentacle point. How you structure your financial plan is a significant aspect of wealth building. So best practices would tell you to start with tax favored accounts and then move to taxable accounts. I suggest that your financial goals should accomplish the following items.

First, fully fund an employer sponsored 401k account (current limits are $18K contribution limit and $6K catch-up contribution for those over age 50). Next, fully fund a Roth IRA account (current limits are $5.5K per individual and $1K catch-up contributions for those over age 50). Then, fully fund your family’s HSA (current limits are $6.75K per family and $1K catch-up contributions for those over age 55). If you have college funds or trusts/ABLE accounts, fully fund those accounts if possible. 

Here, the gift limits may apply so for now the limit is $14,000 per gift, per child. If you are a two parent family, each parent may gift up to $14,000 per child. Beyond this, wealth building becomes a sport. Using a taxable plan to build the resources necessary to fund your Roth/Traditional IRAs and your HSA is outlined in my book.

These are some basic ground rules to follow when developing a financial strategy on building wealth. Keep in mind that wealth building isn’t just about income and the proper dispensation of it. Wealth building also involves financial behaviors, decisions, and opportunities. Best practices are not limited to cash flow. It is a broad area that takes into account your risk tolerance, temperament, acquired, experiential, and observational knowledge, and your learned behaviors. To learn more about these aspects of wealth building, pick up a copy of my book 10 Aspects of Finding Your Niche. The more you know about who you are and how you interact with the world around you, the greater your ability to build wealth will be.

These things are important, but there is one over-arching best practice I would highly recommend you employ as soon as you can. Simply get to know those who are winning at doing what it is that you want to do. When you learn what someone else did to overcome adversity, be it financial or otherwise, you can take the principles and augment them to address the struggles in your life. One thing I have learned being a parent of a child with special needs is this. Our circumstances are often unique, but the struggles are the same. When it comes to finances, our circumstances may be different, but the principles of wealth building are applicable. Figure out what works for others and then apply those principles to your life.

[About the writer: Ken Rupert is the author of several books on strategic planning and spiritual development. As a caregiver for his son who has special needs, his father who has Alzheimer’s, and his mother who is a cancer survivor, Ken is uniquely qualified to work with those who are facing the uncertainty of managing life and providing care. He also applies his skills at financial management to helping others develop strategies to create financial stability. Ken has a degree in Business Administration and Management and has over 30 years of experience in corporate America. His years of working as a strategic analyst has positioned him to help others overcome the stress of life and the pressure of financial problems. He is a Maryland native, a U.S. Army and Maryland National Guard veteran, and a devoted, loving husband and father.]