Evans Wealth Management Blog

Articles written by Evans Wealth Management are designed to educate clients & potential clients on concepts important to their financial future.

The Most Underappreciated Source of Big Returns

Daniel Yergin writes in his book entitled, “The Quest,” the biggest energy story of the last four decades has nothing to do with oil or gas. In fact, it has nothing to do with solar, wind, nuclear or other sources of alternative energy. Care to guess what it is?

It is conservation and efficiency.

Would you believe the biggest impact on our energy resources is not the source of our energy but how much further we can go on the same level of energy today compared to the past? It is estimated the US uses 60% less energy per dollar of GDP today than in 1950. Case in point, the average miles per gallon of all vehicles has doubled since 1975. Essentially, conservation and efficiency have enabled us to travel twice as far using the same amount of energy.

The beauty of efficiency is it’s largely under our control. What it lacks in attention-grabbing appeal from the public, it more than makes up for in impact on our life.

This concept applies to many areas of our life.

The finance world’s version of conservation and efficiency is saving and frugality. These are largely under our control and have a 100% chance at being effective in improving our finances. However, they aren’t nearly as exciting as seeking big investment returns.

Consider two investors. One earns a 10% return and the other 9% per year. But, the second investor only needs half as much money to live as the first. In time, the second investor will have far more money because the second investor’s income is going further despite the marginally lower return.

Had you rather spend countless hours attempting to raise your investment return when the odds of significant improvement are low or increase your return by eliminating the bloat in your finances which will always work?

Long term happiness comes from the freedom to do what you want, when you want and with who you want. It requires a solid asset base which is difficult to obtain when undisciplined spending exists.

Jack Bogle made the point in his recently released book entitled, “Enough,” with the following antidote. Two people are at a party given by a billionaire. The one informs the other that the host, a hedge fund manager, earned more money in a single day than the guest had made from his wildly popular novel over its entire history. The guest/author responded, “Yes, but I have something he will never have … enough.”

Where do you find yourself today? Do you have the “enough” mindset? or Are you spending countless hours pursuing an insatiable desire for more? The answer might lead to the biggest financial breakthrough of the decade in your life.

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