Are The Extras Holding You Back?
Are The Extras Holding You Back?
Have you ever heard a financial independence enthusiast use the term I pay extra for that? I pay extra for childcare, or I pay extra for a cleaning lady. It seems like we use this code to apologize for the fact that we aren’t doing something ourselves. There is a frugal way, and a non frugal way, and sorry but we chose to spend! While I truly understand why this sentiment arises, I also wonder if we are setting our expectations too high. Are you really shooting yourself in the foot? Are the extras holding you back from financial independence? Or is it ok to spend for convenience?
A Basic Misunderstanding
I stumbled for years on the concept of financial independence. I kept on trying to figure out the optimal salary, the optimal net worth for early retirement. The fallacy of those early days, however, was that I was completely oblivious to the spending and budgeting side of the equation. No wonder why I couldn’t understand the definition of enough, I had no idea what a comfortable budget looked like.
After reading extensively, I set out to track my spending. I quickly realized that enough looked quite different depending on how I used my discretionary spending.
What followed was a maniacal tail spin into cost cutting. Could we get rid of our help around the house? Could we jettison one of our cars?
The more I considered, the more fat I found to cut from the budget.
Are the extras holding you back?
Why yes, yes they are!
Possible Vs Plausible
The further down the path I ran, the more I started to question my original assessment. We could get rid of our babysitter who also did the laundry and dishes three days a week. That could cut our budget radically and trim hundreds of thousands of dollars off our FIRE number. But then, was I going to leave my high paying day job to vacuum floors and wash dishes? While I don’t mind housework, would this make me feel more in control than the work I was already doing out in the world?
As opposed to asking are the extras holding me back, should I not be wondering if, conversely, the extras are setting me free?
I don’t enjoy mowing the lawn. If I work an extra thirty minutes a week, I can pay for that. Is it worth it? Which activity leads to more personal happiness?
Decisions
I faced these difficult questions earlier this year when I left my concierge practice. At that time, I had enough work to keep me fully engaged Tuesday through Thursday. My Mondays and Fridays would be completely open after a couple of hours rounding in the early morning.
This schedule provided the perfect opportunity to cut the budget. I could get rid of our housekeeper and extra childcare, and do the work myself. Mop the floors, clean the toilets, do the dishes and laundry, grocery shopping. I would have at least ten hours a week to devote to these various activities
Or, I could take on a new lucrative consulting opportunity that had bubbled to the surface unexpectedly.
The Pleasure Principle
Ultimately, I decided the answer was no. The extras are not holding me back. Financial independence, for me, was not only about spending reasonably but also making a large W2 income. I would gladly spend more money avoiding something I found unpleasurable in order to free up time and energy to create new revenue.
Hour for hour, the consulting gig seemed a heck of a lot more fun and interesting than cleaning the house, stocking the pantry, and vacuuming the floors.
It was personal decision to increase happiness.
Isn’t that the point of money?
How about you? Are the extras holding you back? Did you find your path to financial independence shortened by insourcing?
I think some doctors are guilted into these “extras” because they are worried how society or other doctors will perceive them. I had a party over at my property and one doc asked me how much does something this large cost to have someone cut it (although the property is 7.6 acres about 1.5 to 2 acres are taken care while rest is left natural). He had an incredulous look on his face when I told him I do it myself. Likely I am saving $300 or more a month by doing this, still something that I could easily cash flow without batting an eye) but I actually don’t mind the activity. It’s a great way to get me outside, appreciate my beautiful property (as an aside 2 natural waterfalls are about 200 feet from the back of my house, a 45 ft one and an 8 ft one), I take pride in how it looks after I do it, and it is a bit of a forced workout. Much like doing any DIY project you are much prouder of the result if you did it yourself.
I could fall in the common trap of equating what my time is worth based on salary (I need to sit down and figure what my hourly rate would be but over $300/hr would not shock me). If that’s the case then nothing I do would be worth doing myself. But I don’t consider my personal time that valuable (would likely be watching TV if I didn’t or as of this past month working on my blog)
Also there is the enjoyment aspect. Sometimes it’s just pleasing to do these “chores”.
I actually like most of these chores. And I hate it that my job pays so much more that it makes no sense for me to do it myself. I know, I am crazy.
Crazy…but if you enjoy it than maybe not.
We outsource almost nothing. I love my dishwasher, washing machine, Roomba, instant pot….And now my kids take care of all their own stuff! I made it all so easy they just had to start doing it.
I wonder if some of us high achievers are just wired this way! We love to do things for ourselves.
We tend to be DIY people, but this concept was on my mind when I read the book “The 80/20 Principle”. Basically, I think you’ve got it right. You can add only a couple of hours at your high W2 wage and get these housekeeping tasks done by people at a lower hourly rate. That’s a better trade of your most important asset — your time.
This gives us permission to jettison, at least, the things we like the least!
When I was young I did everything myself. Over thanksgiving my sophomore year of med school, I dropped the transmission in my Mustang and rebuilt the clutch. It was freakin freezing and I did’t have a transmission jack so I rigged something out of levers and fulcrums using paint cans. Would I do that today? Heck no. Now that I’m old, I hire more out, much more. It’s all based on risk and return. If the hurricane comes I’m going to hire a guy with a bobcat and not just get out the chain saw to get rid of that downed tree. Homey don’t play that any more. I think you can probably do a cost benefit analysis but why bother.
When I retired I planned on a monthly income of $10K per month. I had no idea if $10K was going to be enough, but I wasn’t going to be funding a retirement portfolio anymore so I figured my expenses would drop considerably, and they did. After a while I decided to see “how low can you go” for SORR and SWR purposes, just to see where pain would start. My basic lifestyle is $7K per month, that includes 2 kids in college. So I have 3K of discretionary built in. If I want to do something like a trip to Europe I just save up up my 3K’s till I have enough. If I don’t use my 3K’s they are available at some other point PRN. Kid needs car tires? No problemo. Wife wants to party in Vegas, away we go. I could go considerably more than $10K according to the calculators but 10K is a nice working budget for me. When SS finally hits that alone will provide over $5K/mo. I’m working through Roth conversion to further increase long term tax efficiency and to cut Uncle Sam out of my will. So if I hire someone to mow my yard (which I do) so what? That’s already included in the $7K and I’m not interested in riding around in the hot FL sun mowing my acreage, and turning into a raisin. I like to look at my life as epics. I’m in early retirement epic. I’m in Roth conversion epic. I’m in finish up raising my kids and get em launched epic. I’m in pre RMD SS epic. Each of these epics will start to drop of and I’ll be at 70 1/2 epic where I’ll re-retire and reanalyze my cashflow. Several years later my wife will join me in 70 1/2 epic and we will re-evaluate again. As each epic occurs we are closer to death and the ability to screw up the portfolio by making a wrong choice decreases. I won’t outlive my screw up. There is actually quite a bit of solace in approaching your financial life like this. I think 30 year or 50 year plans are stupid. NOBODY knows what’s going to be happening 50 years from now. The only thing you need to do is have a big enough pile to be able to navigate some contingencies. Epics = navigation.
My point is all of this can be planned out, all the way to death with pretty good accuracy. If you have some “one offs” like a new retirement car plan for it, a new roof, plan for it, I’m going to need some new air handlers on my place in the next couple years, already in the plan. Understand your pain point and understand how to manage discretionary, medical expense, and optimize taxes, and do not forget to have a nice life. You don’t have to make all the money just enough money. At some point “accumulation brain” turns pathological.
The vigor of youth is funny. I was willing to do a lot more ten years ago than I am now.
I love this line, “I would gladly spend more money avoiding something I found unpleasurable in order to free up time and energy to create new revenue.”
I am still figuring out the balance between what I am willing to pay for versus DIYing it. The point about the pleasurable principle is a great measuring stick.
I think it’s all about tradeoffs and what they are worth to you.
I think it’s such a wonderful privilege to be able to pay another person to do chores or menial tasks that we deem undesirable or unpleasureable. Some people in the FI community don’t have the same choices and privilege. That said, I’m more than willing to give up my extra dollars to pay other people for their services. In fact, it’s a wonderful privilege to have the power to employ somebody else 🙂
I never thought about it from the employment side. Good point!
It’s all in spending on what you value. If that’s avoiding these tasks then your doing right by you if you can afford it. What I’m willing to do myself has shifted as time passes. These days I’m more willing to pay someone as time is more at a premium.
Isn’t it funny how we put up with much less as we get older and more financially stable?
The extras are definitely not holding me back as I’ve never really had any extras in my budget. But I understand why some people do, especially with kids and limited time
I think you are unique. Many of us out here enjoy paying a little for the extras from time to time.