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The 411 on focusing on your savings rate (and not trying to outperform the market):
172,501: Retirement savings dollars accumulated after 10 years by a worker earning $75,000 who starts with a 10% savings rate, increases savings by 1 percentage point annually, receives 3% annual raises, and earns an 8% annual investment return.
768,541: Retirement savings dollars accumulated after 20 years under the same strategy and assumptions.
2.41 Million: Retirement savings dollars accumulated after 30 years.
6.52 Million: Retirement savings dollars accumulated after 40 years.
90: Percentage of actively managed U.S. large-cap funds that failed to beat the S&P 500 over a recent 15-year period.
4: Percentage of listed U.S. companies that accounted for the entire net gain of the U.S. stock market from 1926 through 2016.
2: Percentage of actively managed U.S. equity funds that both survived and outperformed their benchmark over a 20-year period.
The best use of money isn't buying stuff (don't tell OG)
Money nerd trigger warning: This edition of The 201 may very well be my pièce de résistance. Pretty unhinged. By proceeding, you waive all liability to Stacking Benjamins, LLC as you journey deeper into my mind - a scary, demented place.
Personal finance has an optimization problem. There, I said it; come at me, bro.
Unauthorized poll. New show tagline: "Stacking Benjamins: The misfits of the financial nerd space"
We spend countless hours searching for better investments, lower fees, smarter tax strategies, and the perfect portfolio. This often distract us from the most powerful financial lever available: our savings rate. While most investors would love an extra percentage point of return, an extra percentage point of savings may have a far greater impact because it's completely within our control.
Rather than zoning out and letting ADHD run amuck, that idea kept coming to mind while listening to Joe and OG over on the podcast this week. Although the conversation touched on everything from tax-efficient withdrawals to Social Security timing, the underlying theme was remarkably consistent; good financial decisions create flexibility. Better decision making puts you in a stronger position to handle opportunities, setbacks, and the countless surprises life inevitably delivers.
That's why I'd make a seemingly strange trade if given the choice. If I could improve one financial metric for the average Stacker by a single percentage point, I wouldn't choose investment returns or number of hours listening to Stacking Benjamins (please don't fire me, Joe).
I'd choose savings rate.
The Financial Lever Most People Ignore
Raising your savings rate doesn't raise eyebrows because it isn't particularly exciting. Nobody talks about it at cocktail parties (you'll never hear, "wow, guess who just went to 12% on their 401k?"), and it rarely generates headlines. Yet it drives nearly every aspect of your financial life.
Dramatic reenactment of actual events
Turning the "save more money" spiggot means:
more money flowing into investments,
faster progress toward financial goals,
and a larger cushion when life throws you a curveball.
It also creates something that doesn't show up neatly on a spreadsheet: options (and we're not talking calls and puts here). Life options.
The people who are the most financially confident aren't necessarily the ones earning the most or generating the highest returns. Confidence comes with building enough margin into your life to have choices when circumstances change. You can navigate a job loss, an unexpected expense, or an opportunity that requires taking a risk because they've spent years creating room to maneuver.
That's what makes savings rate such a powerful metric. It doesn't just affect your net worth. It impacts the number of (life) options available to you later.
What an Extra One Percent Really Buys
When most people hear "save more," they immediately think about retirement. Retirement is certainly part of the equation, but it's only one piece of the puzzle.
Before retirement, use a higher savings rate to build an emergency fund faster, reduce dependence on debt (or pay it off), and to save more for your next trip to Disney.
With those short-term goals and hurdles out of the way, you can then accelerate investment contributions, or create new opportunities. Change careers, relocate, start a business, buy a Sizzler franchise, help a family member, (finally) move out of Mom's basement, or weather a difficult season without panicking...they're all now within reach.
The longer I've worked in this field, the more convinced I've become that money is most valuable before it's spent. A dollar sitting in savings or investments can become many different things. Once it's gone, all of those possibilities disappear. That's why building savings isn't really about deprivation. It's about preserving future choices.
Kevin's Korner
One of the most memorable conversations I had during my time at Vanguard involved a young woman who felt overwhelmed by personal finance.
She'd done everything you're supposed to do. She listened to podcasts, read articles, followed experts online, and genuinely wanted to make smart decisions. The problem was that every source seemed to emphasize a different priority. One person said to attack debt aggressively. Another insisted retirement contributions should come first. A third argued that building cash reserves was the most important goal.
The more information she gathered, the less confident she became.
As we talked, it became clear that she didn't need another opinion. She needed a framework.
So we stopped focusing on accounts and started talking about her life. What risks worried her most? What goals mattered most over the next several years? What would put her in the strongest position if things didn't unfold exactly according to plan?
Once we zoomed out, the priorities became surprisingly clear. Building an emergency fund came first because she had very little financial cushion. Capturing her employer match came next because passing up free money rarely makes sense. After that, we could tackle higher-interest debt while continuing to invest for the future.
The recommendation itself wasn't revolutionary. What mattered was the order.
Instead of trying to optimize everything simultaneously, she started building a foundation that would create more options over time. That's a lesson many of us could benefit from. Financial success rarely comes from finding the perfect answer. More often, it comes from consistently making decisions that improve your future flexibility.
Do This in Five Minutes
Calculate your current savings rate.
Increase one automatic contribution by 1%.
Decide where your next raise will go before it arrives.
Review recurring expenses and eliminate one that no longer aligns with your priorities.
Identify one future opportunity you'd like to create and begin funding it.
Let's get started: how to find 1%
The good news is that increasing your savings rate doesn't require a complete lifestyle overhaul.
1) Increase your retirement contribution by one percent during your next enrollment period.
Don't think that's possible?
1a) Direct a part of every future raise toward savings before your spending adjusts.
2) Check for this benefit: Many 401(k)/workplace retirement plans have an automatic annual contribution increase option available. If yours does, use it (assuming you're not already maxing out your contributions)!
3) When a loan is paid off, redirect the payment to savings and/or investments.
4) Use tools like the Vault to find subscriptions you aren't using. When you axe a subscription, redirect the savings.
5) When a bonus, refund, or windfall arrives, decide in advance how much will go toward future goals.
The objective isn't to squeeze every ounce of enjoyment out of life*. The objective is to create a system that steadily strengthens your financial position without relying on constant willpower. Small changes, applied consistently, tend to outperform dramatic changes that last only a few weeks.
(* Disclaimer: I'm not saying you need to go full-on OG-Mode and only drink Fiji water/fly first class your own private jet. When in doubt, ask WWDD - "What would Doug do?")
Zen AF
3 Quick Wins
Save Half the Raise
Commit today that at least half of your next raise will go toward savings and/or investing.
Redirect Found Money
Tax refunds, bonuses, rebates, and paid-off debts can become automatic savings opportunities.
Automate the Increase
Set your retirement contributions to increase by one percent annually and let time do the heavy lifting.
Wrap-Up
who else remembers?
Most investors spend their time looking for better returns.
While you're searching for the next great opportunity, don't overlook one of the most powerful financial tools already available to you. An extra percentage point of savings won't generate much excitement, but it can create something far more valuable than a slightly larger account balance.
It can create choices.
And in a world where plans change, priorities evolve, and surprises are guaranteed, having more choices is often the difference between feeling trapped and feeling prepared.
Take us home, OG...
"All of financial planning, I think, is really just built around how do I put myself in the best possible scenario to have future options available to me."
-OG
Latest Stacking Benjamins Podcast Episodes:
How to Add 1% to Your Portfolio Without Taking on More Risk (The Systems) SB1849
Financial success rarely comes from a single brilliant decision. More often, it's the result of small choices made consistently over time, even when they don't feel particularly important in the moment. If this week's newsletter inspires you to save just one percent more, you've already taken a meaningful step toward creating more options for your future self. Thanks for spending part of your week with us, and we'll see you back here next time for another conversation designed to help you build a little more freedom, one smart decision at a time.
Bankrate's #1 ranked money podcast for 2023. Join 12,000+ other Stackers and be the first to get the latest money news, expert interviews, and all things Stacking Benjamins delivered right to your inbox!
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