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excite your inner foodie. This

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is the show where I read to you and to myself,

1:23

frankly, from some of the best personal finance

1:27

blogs on the planet every single day. For

1:29

now, let's get right to it and continue optimizing your

1:32

life. Why hardcore saving is much more powerful than masterful investing

1:35

by Mr. Money Mustache

1:42

of mrmoneymustache.com. I was recently

1:44

enjoying a conversation with a new friend. Despite my best

1:46

efforts to sound normal and busy, I was able to help

1:48

you make a difference. this

2:00

person eventually figured out that my wife

2:02

and I don't actually do enough paid

2:04

work to sustain the normal middle-class life

2:06

we seem to lead. From

2:09

here, he pried out the fact that I

2:11

am Mr. Money Mustache, the freaky magician who

2:13

retired at 30. When

2:15

people learn this, they immediately start

2:18

grilling me on my presumably amazing

2:21

investment skills. You have

2:23

to be a stock market wizard to

2:25

retire unusually early, don't you? Unfortunately,

2:28

I have a pretty poor investment

2:30

record myself. As an early 20-something,

2:33

I thought I could pick winning stocks and

2:35

ended up buying some that went nearly to

2:37

zero. These were balanced

2:39

by some that went up nicely and

2:41

these experiences combined to average out to

2:43

about the same return the stock market

2:45

as a whole would have given if

2:47

I had just bought a nice index

2:49

fund. Through my later 20s and 30s,

2:52

I thought I was wise by squirreling lots

2:55

of money away in the excellent Vanguard 500

2:57

Index Fund or VFINX. But

3:01

then the Great Recession happened and temporarily

3:04

backed out all those gains. I

3:07

did make some reasonable money from home

3:09

ownership and managing a rental house, but

3:11

most of that was earned by increasing

3:13

the value of the houses with old-fashioned

3:15

sweat equity, renovations I did

3:18

myself. In investments,

3:20

you will win and lose on average

3:22

and statistically the best you should expect

3:24

is to match the market, which

3:27

historically is about 7 to 8

3:29

percent annually after inflation is subtracted out.

3:32

But let's hypothetically say you were

3:34

a masterful investor. The best

3:36

investor in modern history, Warren Buffett,

3:38

has averaged investment returns of about 20

3:41

percent per year for over 40 years.

3:44

This is about four times higher than

3:46

the laziest investor who just bought guaranteed

3:49

return bonds. Now

3:51

let's say you are a masterful middle-income

3:53

saver. You are married and you and

3:55

your spouse earn 120,000

3:57

combined per year. Say 90,000 a month. After

4:00

taxes. With. Skill: The two

4:02

of you can save at least fifty

4:04

thousand dollars per year of your combined

4:06

income between regular and retirement accounts. Max.

4:09

Compare this with the average personal savings rate

4:11

in the Us six percent of the time

4:14

of this article, which is actually higher than

4:16

usual because we're in a recession. As.

4:19

Little as one person during the big credit

4:21

and spending boom of the mid two thousand.

4:23

And average couple would save less than five

4:25

thousand. Dollars per year. So. The

4:28

difference between average and amazing

4:30

investors is four to one.

4:33

But. The difference between average and

4:35

mustache level savers is at

4:37

least ten to one. So.

4:40

Over the short timer as and we're talking

4:42

about which is seven to ten years to

4:44

retirement. You'll. Get much better results

4:46

from learning some this blog in other

4:48

words working and are spending then you

4:50

will by trying to be a Cnc

4:52

market beating investor. That's. Why

4:55

I often repeat the message of just pay

4:57

off all of your debts than start throwing

4:59

it all into the Vanguard Index Fund. Sure,

5:02

It will go up and down with abroad

5:04

stock index, but these are your retirement savings.

5:06

You'll be living off of them for the

5:08

rest of your life. And while we can't

5:11

predict the future, we can choose the statistic

5:13

li best place to get a high long

5:15

term returns. And. That place is

5:17

in lieu fi index. Also.

5:20

By wiping out, you're dead, including

5:22

your mortgage early on, your effectively

5:24

investing in some guaranteed bonds. Paying.

5:27

Off of five percent mortgage guarantees, you

5:29

have five percent return forever. Although this

5:31

is no and inflation adjusted number since

5:33

if you leave your mortgage on paid

5:35

for ever, the remaining balance will eventually

5:38

de flea away to a very small

5:40

number relative to the cost of other

5:42

things. And other words, you may

5:44

be able to pay off your a hundred and

5:46

fifty thousand dollar mortgage when you're a hundred with

5:48

just a change in your wallet. But.

5:50

Even five percent before inflation is

5:53

still a good guaranteed return with

5:55

tidies treasury rate. Causes.

5:57

People like me are still wise to pay off their

5:59

more. His early. With. No

6:01

mortgage or other loans. My family six

6:04

costs are only a tiny fraction of

6:06

what the typical indebted person needs to

6:08

pull in. So. There's lots of

6:10

flexibility and when to sell off portions

6:12

of the index fund for future living

6:15

expenses. And. The dividend checks keep

6:17

coming every quarter rain are suing.

6:20

Back. To the point. By. Concentrating

6:22

on saving rather than minute details

6:24

of investing your stalking me as

6:26

in your favor while also free

6:28

enough time for the real deal.

6:31

Maximizing your phone in a cast

6:33

efficient way. You.

6:38

Just listen to the post titled

6:40

the Research or Ceiling is much

6:42

more powerful than Masterful Investing. By.

6:45

Mister Money Mustache of Mister

6:47

Money mustache.com. And I'll be

6:49

right back with my commentary. Looking.

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Things affordable with some of the lowest

7:11

prices out there. And. Keep it

7:14

all reliable, With. On time

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ground shipments. It's. Time to

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loved this article as it's just

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8:47

I wonder, am I really doing all

8:49

I can to optimize my investments? I've

8:51

been thinking about this a lot

8:53

lately with all the excitement around

8:55

cryptocurrency and other speculative investments. I'm

8:58

someone who talks about money every day.

9:00

Shouldn't I try to be a more

9:02

savvy investor? When I get into these

9:05

thought loops, I inevitably turn to friends

9:07

who are much more knowledgeable about investing.

9:09

And the answer is always the

9:11

same. The likelihood that you're going

9:13

to beat the market over the long

9:16

run is slim to none. So why

9:18

bother? There are people

9:20

who enjoy the process of stock picking

9:22

or analyzing different kinds of investments, but

9:25

I'm not sure that's really how I want to spend

9:27

my time. I also noticed

9:29

that when it comes to investing, I've

9:31

put a much bigger focus on how

9:33

much on investing rather than the return

9:36

on those investments. Think of

9:38

it this way. Let's say there's a

9:40

super savvy investor who hits big with

9:42

a 50% return on

9:44

his hundred dollar investment. He

9:46

ends the year with a hundred and fifty

9:48

dollars. It's a fantastic return. But

9:51

I will still make out better with

9:53

my market matching 10% return

9:55

if I invest a hundred and fifty dollars.

9:57

I'll end the year with a hundred and

9:59

sixty five. I'm

10:01

passive about the actual investing part,

10:04

but I'm very active in the

10:06

areas of increasing my income and

10:08

reducing my expenses. This

10:10

is the aspect of money management that

10:12

I have the most control over, so

10:15

I feel that it's worth the majority of my

10:17

time. I also think

10:19

keeping things simple makes my strategy more

10:22

sustainable as it allows me to be

10:24

consistent. I focus on

10:26

fully funding retirement vehicles and

10:28

keeping a healthy emergency slash

10:30

opportunity fund. It

10:32

may not sound as sexy as optimizing

10:35

investment returns, but it's guaranteed to help

10:37

me reach my long-term financial goals. And

10:41

that should do it for today. Have a happy

10:43

rest of your day and I'll see you on

10:45

the Tuesday show tomorrow, where your optimal life awaits.