“Your time is limited, don’t waste it living someone else’s life.”
– Steve Jobs
In today’s letter:
- The ROI of Simplifying: The concept of Return on Hassle used by high net worth individuals
- Economy weakening with Rate Hikes: Costco sales slump, Tesla cuts prices again, WWE and UFC merger
- 40-Year Mortgages: The the Federal Housing Administration preparing for something big?
- Cool tool, a great read, and amazing architecture
The Dossier
The ROI of Simplifying Your Life: A Millionaire’s Perspective
I’ve observed many high net worth individuals, and most of them share one unique approach to wealth building: they don’t just focus on Return on Investment (ROI), but they prioritize Return on Hassle (ROH).
So what is Return on Hassle?
ROH can be defined as the amount of money you save or earn divided by the time, money, and mental anguish involved in achieving it.
As your net worth and tax burden increase, you can allocate more resources to the denominator to drive up the numerator – or in other words, you start eliminating things from your life that require too much time or mental strain, as they don’t help build wealth.
A great way to think about this is to assign a rate for your time, such as $3,000 per hour (yours may be different), for tasks you do not like to do. Then, if the task is less than this number, you outsource it. This idea encourages you to focus on what will drive your success and earning power.
If managing your portfolio and learning about financial markets is something you enjoy and doesn’t earn your hourly rate, that’s okay; this applies to things you DON’T like.
Common Low ROH Activities in Terms of Finances:
Obsessing over withholding Taxes: Instead of perfecting your withholding to avoid giving the government an interest-free loan, consider paying extra for peace of mind.
Back Door Roth IRA contributions: If you earn over $200k, you can make a $6,000 non-deductible IRA contribution and roll it over to a Roth. But is the potential brain damage from figuring out and staying IRS-compliant worth it?
Complex business structures: While the right structure can save millions, it’s not true for most new businesses. Don’t let researching the ‘ideal’ way to start a business turn into procrastination.
Series I savings bonds: Tied to inflation, these bonds may not yield significant returns. Weigh the pros and cons of locking up your money for 1-5 years.
Overly complex estate plans: Although these can save millions for high-net-worth individuals, they come with setup, ongoing compliance, and tradeoff costs. Assess whether the potential savings outweigh the risks and expenses.
This principle doesn’t just apply to finances; it can also be used to enhance your lifestyle. Here are some high ROH lifestyle activities that can improve your overall well-being and save time for more valuable pursuits.
High ROH Lifestyle Activities:
Hiring an assistant: Delegating tasks like running errands, answering emails, paying bills, and organizing to a capable assistant can free up your time to focus on higher-value tasks.
Personal chef: A skilled chef can revolutionize your life by grocery shopping, planning healthy meals, and ensuring you have delicious food. Eating well without spending hours in the kitchen can boost your productivity and overall satisfaction.
Utilizing technology: Embrace tech tools like Zoom to eliminate unnecessary commuting and attend meetings from the comfort of your home. Or even robo-vacuums to keep your house clean with minimal effort.
Hiring great professionals to take care of these tasks will give you more time to do what you enjoy and ultimately add to your lifetime value as an earner.
I will note that this doesn’t mean spending excessively on everything you can imagine. Hiring and managing these tasks is a task within itself. Think about what is essential and the long-term benefits.
Managing your personal investment account is something I highly advocate. The management fees that brokers charge is excessive and will erode your long-term profits. Managing your investments is much easier than it may seem. Take the time to learn, and you will be well rewarded.
BRAIN FOOD
Costco’s Sales Slump: A sign of larger economic trends?
Tesla Price Cuts: A sign of changing electric car market?
Game Changer: WWE and UFC merge to create ultimate fighting spectacle
Green Demand Outpaces Supply: Copper miners struggle to keep up
Gold Prices Climb: All eyes on potential new record high
Sneakers Make History: Michael Jordan’s shoes set to break record at Sotheby’s
NUMBERS IN THE NEWS
A New Era of Mortgages? The 40-Year Loan
Have you heard about the buzz around 40-year mortgages? Yes, you read that right!
The Federal Housing Administration (FHA) has approved a proposal for 40-year loan modifications starting May 8, 2023. We’re used to the standard 30-year mortgages in the US, but things might be changing soon.
Commenters of the proposal mentioned, “extending the terms of loan modifications may be the only option to prevent borrowers in default from losing their homes.”
This seems quite odd coming out of an era of sub-4% loans. Are the regulators seeing a wave of mortgage defaults on the horizon?
This move could be the precursor to making longer-term loans the new normal, making mortgages even more “affordable” in the eyes of buyers – but not in reality.
It’s no secret that Millennials and Gen Z are struggling with increasing housing prices and have been quite vocal about the increasing home prices. Some have even surrendered to the idea of ever owning a home.
While a 40-year mortgage would reduce the monthly payments slightly, the total price paid for a home would rise.
Take a $500,000 mortgage at 6.75% interest, for example: after 30 years, you’d pay $933,981. Extend that to a 40-year mortgage, and the cost jumps to $1,158,445! But hey, your monthly payments would dip from $2,594 to $2,413 (excluding taxes and insurance).
So, are 40-year mortgages the answer to our housing woes? Time will tell.
ENTERTAINMENT
The NBA will no longer test for marijuana use under a new agreement between the league and the NBA Players Association (NBPA).
HAND-PICKED
📖 Great Read: Trillion Dollar Coach – Bill Campbell One of the greatest coaches of CEOs. Including Steve Jobs, Larry Page (Google), Sergey Brin (Google), Sundar Pichai (Microsoft), Jeff Bezos (Amazon).
🔨 Cool Tool: Find the perfect word between two words
🏠 Amazing Architecture: The luxurious Black Villa in New York
MEME OF THE WEEK
