Welcome to the Root Assets PLC blog! Today, we’re exploring a crucial aspect of personal finance: the balance between saving more and seeking higher investment returns. You might be surprised to learn that small changes in your savings habits can have a more significant impact on your financial future than chasing high returns on your investments. Let’s dive into this concept with a relatable example.

Meet Jerry: The Average American Saver

Imagine Jerry, your typical American. Like many of us, Jerry saves about 5% of his income, which amounts to $5,000 annually. If Jerry were to earn $100,000 per year, this means he’s spending or “giving away” $95,000 each year on expenses, interest, taxes, and more. But what if Jerry could find a way to save just a little bit more?

Scenario 1: Boosting Investment Returns

Suppose Jerry is an exceptional investor and manages to achieve a 10% return on his $5,000 savings. That would give him an additional $500 per year. Not bad, right? But let’s see what happens if he focuses on saving more instead.

Scenario 2: Increasing Savings

What if Jerry could save just 1% more of his income? That 1% equates to $950 from the $95,000 he typically spends. By saving that extra $950, he’s effectively adding nearly double the amount he would gain from the 10% investment return. In fact, that $950 is equivalent to earning a 19% return on his current $5,000 savings!

The Bigger Picture: Savings as a Foundation

This example highlights a powerful truth: small increases in savings can have a disproportionate impact on your financial health. By focusing on reducing expenses, managing debt, and increasing savings, you can build a stronger foundation for your financial future. This doesn’t mean investment returns aren’t important—they are—but the foundation of savings is crucial.

The Hidden Cost of Interest

You may have heard that the average American spends over $600,000 on interest over their lifetime. While this figure is striking and serves as an illustrative example, it’s important to note that actual amounts can vary based on individual circumstances. Nonetheless, the message is clear: managing debt and reducing interest payments can significantly boost your savings.

Practical Tips to Increase Your Savings

Here are a few actionable steps to help you save more and strengthen your financial foundation:

Track Your Expenses: Discover Root Assets PLC unique approach to finding money that you may be losing. And no, this isn't some crazed budget plan like you see from the popular talking pieces.

Analyze the difference between good debt and bad debt: Financing appreciating assets = good debt(think real estate). Financing depreciating assets = bad debt(cars, credit cards, student loans, etc...) The value of you home does not increase by the amount of equity you have in your home. That is dictated by market trends. The only way to then access your equity is to refinances and pay interest on money you most likely already paid interest on at least once, or sell your home. Neither of those options are very appealing. You'd be better off burying the extra payments you make in the backyard. Much more accessible, and accomplishes the same results, zero gains.

Reduce Debt: Focus on paying off high-interest debt first. The less you pay in interest, the more you can save. By focusing on getting rid of financed depreciating assets, you will retain far more capital.

Understand risk vs reward: The old saying goes; high risks = high rewards. While that maybe true, the older we get the less time we have to recover from losses and correct our financial course. Root Assets PLC focuses on giving your money more than one job in order for you to lessen the amount of risk you would want to take.

Establishing you own "bank": Understanding how the principles of banking works, we help you put those concepts to use. Building large reserves, eliminating costly interest, and giving your money more than one job.

How Root Assets PLC Can Help

At Root Assets PLC, we understand the importance of a holistic approach to wealth management. Our team of experts can help you assess your current financial situation, identify areas for increased savings, and develop a tailored investment strategy to grow your wealth.

We take a proactive approach by meticulously analyzing your financial landscape to uncover areas where you might be losing money unknowingly or unnecessarily—be it through hidden fees, inefficient tax strategies, or overlooked expenses. Once identified, we redirect these "found" dollars to bolster your savings and create new investment opportunities, ensuring your money works harder for you.

Whether you’re looking to reduce debt, increase savings, or optimize your investment portfolio, we’re here to support you every step of the way.

Take Action Today

Take a moment to reflect on your own savings and investment strategies. Are there areas where you could save more? Could you benefit from a professional review of your financial plan? Contact Root Assets PLC today to schedule a consultation and start building a brighter financial future.

Disclaimer: The examples provided in this post are for illustrative purposes only and may not reflect individual circumstances. Always consult with a financial advisor before making significant financial decisions.

By focusing on the power of savings, you can take control of your financial destiny. Remember, it’s not just about how much you earn on your investments—it’s about how much you keep and grow over time. Let Root Assets PLC guide you on your journey to financial success.