Most of us are intimately familiar with Return on Investment (ROI).
Invest $1 today to generate $1.20 tomorrow.
The higher the ROI, the better.
Or is it?
I’d like to introduce to you the concept of Return on Hassle “ROH”:
Return on Hassle takes into account the time and energy required to achieve a specific Return on Investment.
In this article, I want to give you 5 examples of activities with a decent ROI.
But low ROH.
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Flexible Saving Accounts (FSA)
An FSA is a great way to save money on taxes.
Contribute $3k into an FSA and pay ~$1k less tax.
But you are required to track medical receipts and submit them to your benefits provider for reimbursement.
Those receipts don’t always get approved right away (trust me, I know).
Managing your FSA could easily take 20 hours of your time over the course of a calendar year.
Not to mention some major annoyance.
Factor that energy into the equation and the $1K savings becomes much less meaningful.
Note: this doesn’t necessarily apply to HSA’s, which carry great value if you’re young and healthy. More on HSA’s here.
Doing Your Own Taxes
If your financial situation is relatively straightforward, a CPA will run you ~$800.
Anyone would love to save $800.
Feels like a good ROI.
But to save $800 you’ll probably spend 10 hours gathering files and entering data into TurboTax.
Moreover, one small error can lead to overpaid taxes.
Negating the cost savings altogether.
Note: I know some of you enjoy preparing your taxes. I do too. If it’s “fun” for you, I get it. But if it’s a hassle, outsource it every time.
Picking Individual Stocks
It’s extremely difficult to beat the market.
Essentially no one does it.
Tinkering with your portfolio allocations ends up being a huge time suck.
Pick a few low-cost index funds with broad market exposure and move on.
Focus your time on building more active income instead.
Credit Card Points
I’m sure I just triggered a few of you reading this.
People that are into CC points are really into CC points.
You may enjoy optimizing 10 different credit cards to get a free trip to Mexico.
I get it.
But that stuff takes a lot of energy.
If you don’t really enjoy it, don’t do it.
I fall victim to this all of the time.
There is a major administrative headache that comes with managing multiple savings accounts, retirement accounts, LLCs, syndication investments, mortgages, etc.
Be critical of unnecessary complexity.
The older I get, the more I realize too much diversification can be counterproductive.
Two practical examples of ways to simplify:
Use 1 high-yield savings account with high FDIC insurance (eg. Wealthfront)
Consolidate old retirement accounts from former employers
To be certain, Return on Hassle evolves.
It’s ultimately a reflection of the dollar value of your time.
When you’re 21 years young, with a simple 9-5 and no financial assets, spending 3 hours gathering files and entering them into TurboTax may be a good ROH.
But be careful.
Don’t fall into the trap of obsessing over little things that don’t actually move the needle.
In my early 20’s, I maxed out my FSA, tried to beat the market, always did my own taxes, opened a dozen credit cards and overcomplicated my investing strategy.
I spent a lot of time chasing pennies (while walking over dollar bills).
That’s it for today.
Until next week,