Why Your Savings Rate Matters So Much

You’ll often hear me say “focus on what you can control” when it comes to your personal finances. Let me show you why.

When you’re in your 20s, 30s, & 40s, the amount of money you save and invest will have a larger impact on your investment outcome than your investment returns. Take a look:

Both Jeff and Rob make $100,000 a year and have already saved $10,000:

-        Jeff invests $500/month and earns a respectable 7% investment return each year

-        Rob invests $250/month and earns a higher 10% investment return each year

After 20 years Jeff still has a higher outcome than Rob, even though his investment didn’t perform as well. Generally speaking, if you invest more into something over the long run, you will do better than if you invest less.

The beauty of this is that no investment return is exactly the same every year for 20 years and you can’t predict what returns will be anyway. So why focus on it? Make sure you’re invested, let the market take care of itself, and do the best you can with what you have.

His name is Jeff!