The Numbers That Matter

I’m a pretty self proclaimed nerd, and the stuff I get excited about is not what you’d normally share over drinks.

For example, I love a good instruction manual. 

Since having young kids at home, the amount of things I have to put together has grown almost exponentially it seems.

Sure, you could look at the pieces you have and just get started, like a monster. But I would rather meticulously follow the manual to do it right the first time. 

I also still feel bad about that phase I went through in college where I was obsessed about developments in internet browsers and would try to talk about it to anyone that would listen. 

It seemed really exciting at the time.

I also love to brag about my checking account. 

I have a Charles Schwab high yield checking account and I love being a Schwab customer. 

No, really. This isn’t an ad.

It has all of the features that I want, and none that I don’t need. One thing that my checking account has is that it actually pays interest each month. I honestly don’t know of many checking accounts that still do that. Many accounts actually charge you a monthly fee unless you jump through a few hoops for them.

I remember being so excited that I opened this account up. It was something that I literally wanted to brag to people about. Not only would this checking account reimburse me for any ATM I wanted to use, but they also pay me interest each month. 

Right now, it pays .03%. Which is way better than the 0% you get paid most of the time.

I just felt super cultured that I had such a fine checking account.

Now, I’m going to be honest, I still love this checking account. I think they’re the best. 

But the truth is, numbers like the APY on your checking account just don’t matter when it comes to your financial health. 

There’s a lot of small numbers when it comes to your finances. Small numbers that don’t really move the needle when all is said and done. 

Even your credit card points won’t make as big of a difference as it may seem. 

Don’t fuss with the small numbers.

Be on the lookout for the big numbers in your finances. And then don’t worry about the little ones. 

I’m not talking about the amount of money you have. I’m talking about the things that will have a huge impact on your money(or be a big drag), not the things that are inconsequential.

A big sticking point for people is having their emergency fund sitting in a savings account or checking account not earning much interest. They feel like if they only had that money invested, that they could at least earn interest off of it. 

But that’s not what an emergency fund is for. An emergency fund is for peace of mind and for protecting you against storms. Even if you earned 3% on $10,000, you’d only earn $300. Sure, that’s free money. 

But compared to how much you earned this year?

The interest you could earn off of your emergency fund won’t matter. It’s not a number worth worrying about. 

And keeping your emergency fund in a simple savings account that doesn’t earn much ensures that that money stays liquid and that you’re not putting it at risk. 

Your savings account interest won’t matter either. Even if you have the best APY on the planet, the amount you earn over the course of the year is nothing compared to your salary. 

Focus instead on the numbers that do matter.

It’s not that there’s anything wrong with earning interest on a savings account. But spending an inordinate amount of time optimizing those savings rates aren’t going to make much a difference.

Instead, you’d be much better off spending your energy focusing on the big numbers that will end up being worth thousands and thousands of dollars over the course of your career.

The most important number in your financial picture is your margin. The money that’s left over after you take your expenses out of your income. 

It’s not a number that’s given to you from a bank, but this number matters. 

We are so used to living right up to the amount we earn instead of giving ourselves the breathing room we desperately need. When you give yourself space, you’re much more easily able to use the margin you have to save, pay off debt, and use your money to enjoy it. 

But we spend it all. I’m guilty of this too and it drives me nuts. 

So make sure that you’re giving yourself a chance by actually creating the margin you need in your finances.

When it comes to investing

When it comes to investing, the number that will have the single biggest impact to your nest egg is how much you saved. While there are many numbers that do matter when it comes to investing, it won’t matter at all if you didn’t actually save anything. So when you’re looking at your investment strategy, make sure that you’re actually contributing.

But once you’re saving, aren’t there some really important numbers to watch out for when it comes to investing?

Yes, and here’s when paying attention to numbers could end up saving you thousands and thousands of dollars over the course of your career.

There’s a really important number to be watching for when it comes to the funds you invest in. It’s called your expense ratio. It’s a small percentage of your fund that the fund owner charges you to manage it. 

That’s why it’s so smart to invest in low cost index funds. Those expense ratios are super low.

According to Vanguard, focusing on keeping your expense ratio low could save you $7,000 in expenses on a $10,000 investment over 30 years. 

Not a small chunk of change, and since you’ll be investing so much more than that, the amount of money you save would be huge.

Stay away from high interest credit card debt.

Credit card debt is no joke. Interest rates often run from 15%-over 20% APR. It’s the worse kind of debt you could have and it’s killer to your bottom line. 

You probably don’t need to hear from me that credit card debt is bad. 

But more important than the amount of credit card debt you have is what you plan to do about it. 

Creating margin and making sure you enough to start getting ahead will be the most important thing you can do. Prioritize getting rid of credit card debt. It’s the biggest drag on your finances that you’ll find.

Remember to keep focusing on the numbers that matter. There’s lots of small numbers to distract us in our finances, but that ultimately, won’t matter in the big picture. 

But then there’s those numbers like the expense ratio of your investments and your credit card debt that will amount to thousands and thousands of dollars.

Keep focusing on the big wins when it comes to your money, so that you gain the most ground without hitting the point of diminishing returns. 

Jared

P.S. Where do you find you excel with your money? Where do you feel like you still need to do some work? Where could you use some help?