As I gradually align my life with my desired life, I discover that minimizing time spent on chores is a priority for me, and that includes financial chores. I go on a lot of fun trips (I'd call them vacations, but they're probably too frequent for that term as I went on nine in a three month period between mid-July and mid-October of this year.) Many of those are to locations without cell phone coverage, but even when there is coverage, I don't really want to spend my time there checking email or the comments on this site, much less looking at my financial accounts.
What's the point of being financially independent if it just replaces some chores with others? So I'm always looking at ways to spend less time dealing with my finances, preferably with only minor costs, but better yet if there are no costs or even some gains. In that vein, here are six ways I thought up to spend less time on finances while still winning with money.
# 1 Spend Less
One of the best ways to spend less time on financial chores is to spend less money. The less stuff you buy, the less time you spend researching, purchasing, maintaining, storing, cleaning, returning, selling, and giving stuff away. Some of that even goes for experiences too. Don't buy a vacation and you don't have to plan it, much less go on it. Obviously, there is a balance to be found here.
Another benefit of spending less is that you have less worry about having enough money, both now and later. You don't have to watch that checking account like a hawk, because at the end of each month there is more in it than there was at the beginning. Every few months you can move the extra over to savings or investments, but there is no checking in every week, much less every day.
As I've written before in Budgets Are For Rookies, once you've won the budgeting game, you no longer have to budget. There's some more saved time. We still kind of track spending, but because we don't actually have a need to budget, that process can often be put off a month or two.
One of the WCI employees earning her modeling fees in Rat's Nest Cave near Banff NP
# 2 Keep More In Cash
Another way to spend less time thinking about money and checking account balances is to simply keep more cash around. That means more cash in checking, more in savings, and maybe even more in your emergency fund. If you have a $5,000 purchase that comes up, you don't have to check your checking account because you know you always keep $15K in there. There's no moving money between checking and savings multiple times a month.
Obviously, there is a cost to this, versus optimizing the return on every dollar, but you only get so much bandwidth in your life. What do you want to spend it doing?
# 3 Automate, Lump, and Simplify Investments
One of the best ways to minimize your hassle is to automate as much as you can. For example, most 401(k)s can automatically take money out of your paycheck, move it into the 401(k), and deploy it into your pre-selected asset allocation. Take advantage. You can do the same with 529s and even taxable accounts if you like (but beware the tax consequences of frequent small purchases in a taxable account.)
Another great method is to fund accounts with a big lump sum whenever possible. We have tons of investing accounts, but nothing says we have to fund them all equally in any given month. So we tend to fund our backdoor Roth IRAs, HSA, and 529s the first week of the year. Done! No more hassling with that until the next January. Where does that money come from? Well, maybe we had a 6-month emergency fund in December and a 3-month emergency fund in February. No big deal. No reason you can't do that with larger accounts like 401(k)s too. In fact, some people only contribute to 529s once every 5 years!
Simplifying your investments also helps. It is far less work to maintain a 3 asset class portfolio than a 10 asset class portfolio. Combining investment accounts when possible also helps. Avoiding most alternative investments can also help simplify things for you now, your spouse if you pass, and eventually, your heirs. They'll thank you for having 3 or 4 index funds instead of 42 crowdfunded properties and 11,219 peer to peer loans to liquidate. Having simple investments will also help come tax time.
# 4 Quit Watching Your Investments
I'll be honest. Watching my investments is really boring. The last time it was exciting was about March 2009. Since the Global Financial Crisis, nothing else really seems very interesting. If you're still relatively new to investing, then sure, pay some attention. You'll learn a lot. But eventually, you'll probably get bored as I have. Then you can quit watching them.
“But what about tracking them carefully to see what my return is?”
Once a year is probably enough, no? Especially if your return is pretty much whatever the market gives.
“But what about rebalancing, or making sure my new contributions go where they're most needed?”
It turns out that, due to momentum, rebalancing is probably best done no more frequently than once a year, and maybe once every 2 or 3 years is optimal. Having your asset allocation yaw back and forth a bit isn't a big deal either. A 75/25 portfolio and a 70/30 portfolio just don't perform that differently and having your small value allocation drop to 4.82% just isn't cause for concern. I have a confession. I don't actually add up the value of my investments each month before making my 401(k) contribution. I just pick one of the ETFs (usually VTI) and buy it. I go for months at a time with my portfolio a little out of whack. It just doesn't matter that much. Since the rebalancing bonus is mostly a myth, don't spend a lot of time trying to get it.
# 5 Put All Your Spending On One Card
Some people are using cash, checks, a debit card, and 4 or 5 different cards for different categories and budgeting. That might help you to optimize the return on every last dollar of spending, but it also requires more of your time. Want a list of your spending mailed to you each month? Put all your spending on a single credit card. Heck, you can go one step further and just use your debit card for everything. Heck, you can even pull the data into the software of your choice automatically. Yes, you might be able to get a few bucks more by hacking your credit cards, but it's Your Money or Your Life. And cash? Who has time for a trip to an ATM? By the way, if you're not depositing your checks with your phone yet, it's time to get with the times. Better yet, use Paypal to settle up with friends and family after a trip and skip the whole check writing thing altogether.
# 6 Set It and Forget It
Many of your tasks lend themselves well to a set it and forget it mentality. Decisions about student loan management, a financial plan, and an asset allocation only need to be made once. Disability and life insurance can very reasonably be purchased once in your entire life. A will and even more advanced estate planning and asset protection steps can last for years without any attention paid to them. A retiree can buy an SPIA instead of worrying each month about how much to withdraw from the portfolio.
I considered adding a # 7, hiring a professional to do some of these tasks. Unfortunately, sometimes that doesn't save you as much time as you might think. Whether an accountant or a financial advisor, you still have to hire them, meet with them, keep your own records etc. That's fine if you need or want the expertise, but chances are you aren't saving nearly as much time as you think using these professionals. If I can go for three months without looking at my investments, your advisor can, and probably does, go three months without looking at your investments too.
Time may be money, but if you're like most readers of this site, you're likely to have a lot more of one than the other on your deathbed. Use some of your money to buy time now while you still can.
What do you think? What steps have you taken to minimize the amount of time spent on your financial chores? Comment below!
I like this post. Set things on autopilot and stop stressing. When I was first learning about PF I read several books over the course of a couple of months and read this and other blogs with most of my free time in residency. Now that I have a basic understanding – enough to know how to capture the market gain and limit expenses – it takes far less time with little if any penalty to the gains I will (hopefully!) make.
You forgot a big one: Don’t get married and don’t have any little rascals running around. Who has time to keep track of all their expenses when you can simplify your life by just dealing with one person’s minimal spending. I kid, I kid!
Seriously though, good article reminding us that simple is better, as always.
-but beware the tax consequences of frequent small purchases in a taxable account.
Can someone explain this? I am placing about 5-6k per month, as I get paid, into a taxable account. Is this too frequent?
Can’t speak for WCI, but frequent small purchases might mean you’re writing frequent small checks or initiating frequent small transfers… that you’re slightly complicating your tracking of basis because you have more lots by the time you do this for a few years or decades… that you’re maybe needing to spend more time thinking and analyzing if you’re sprinkling that frequent small purchase money around…
Or you could just batch this work once a month or once a quarter?
Dealing with cost basis when selling, I believe is the thought. Your provider probably keeps track of this automatically, so as far as I know, it shouldn’t be a problem.
Exactly. Your brokerage does keep track of it, so it isn’t the end of the world, but as Mr. Nelson suggested, I would try to batch. Not only might that save you commissions, but it limits the number of tax lots to keep track of and personal record keeping entries if that matters to you. I even do it in my 401(k) for two of those three reasons. My entire 401(k) contribution goes into the same asset each month. One month might be EM, one month might be Intl Small, one month might be TIPS, but there’s only 7 or 8 transactions for the whole year so I only pay perhaps $50 in commissions.
So would it be better for me to save up 25k or so and invest instead of doing 5k per month in my taxable account? 4 lots instead of 12? I am just doing total stock and total international at the moment in my taxable.
You have to weigh the tax hassle vs the potential extra return.
The way I do my various accounts is mostly 1 at a time. So in January, it’s Roth IRAs, 529s, and HSA. Feb/Mar is defined benefit plan for the previous year. Then I start into the 401(k)s. By the end of the summer I’m about done with them and I move into taxable investments/debt paydown, all to start it all over again the next year. That allows me to do a lot more lump sums.
If one is buying mutual fund shares I would have to argue that making continuous purchases throughout the year is more advantageous than making one or a few lump sum contributions. What happens when markets are at an all time high (like they are right now in January when you’re making your Roth contribution) and then by April and May the market pulls back 5%-10% and you’ve already made your contribution? I would rather dollar cost average my investments so that I am not buying all at once at a more expensive price-per-share. I would say that keeping steady contributions throughout the year, and then making lump sum contributions strategically when the market corrects or has a pull back. Buy the pull backs. Buy when the market goes on sale!
This comment needs to be addressed, and perhaps the best way to address it is to link to this post:
https://www.whitecoatinvestor.com/dollar-cost-averaging-is-for-wimps/
First, it’s important to distinguish between periodic investing and dollar cost averaging. Periodic investing is what most of us we do, we invest when we have the money. Sometimes we get more shares for the same amount of money and sometimes we get less. But it isn’t dollar cost averaging. Dollar cost averaging is when you have a lump sum and you CHOOSE not to invest it all at once, but rather to do so over a period of time. Most of the time, you will come out behind dollar cost averaging than lump summing because markets usually go up. About 2/3 of the time, lump summing wins, so a priori, that’s the best choice. Think about it, if markets go up (as they usually do) the price on January 3rd is likely to be better than the other prices that will be available during the year.
Second, you assume that by lump summing my Roth IRA for instance that I am not getting the benefits of periodic investing. I am, it’s just that in January I do the Roth, in February I do the 401(k), in March I do the 529 etc. So if the market drops, I’m going to get a “deal” in one of my investing accounts. So I am doing continuous purchases throughout the year.
Third, the problem with waiting for a pullback, perhaps most famous for Boglehead LiveSoft’s “Really Bad Day” strategy, is that the pullback sometimes never comes and you end up buying at a higher price than you would have gotten if you had just bought. Plus, the difference between buying at the first of the year and at the year’s low is not very large. Investing is about time in the market, not timing the market.
Fourth, waiting or a pullback is just market timing. If you think you can time the market successfully, why would you limit yourself to just that? Look into your crystal ball and figure out what stock will do the best this year and leverage your entire life to buy as much of it as you can. That sounds crazy, you say? It’s just a matter of degrees. A little market-timing, while it won’t have as dramatic of an impact on your portfolio either way, doesn’t somehow become a smart thing to do just because you only do a little of it.
Finally, the “all-time high” thing. You do realize that MOST OF THE TIME markets are their all-time high, right? Look at a chart of the stock market. Here’s one: https://www.google.com/finance?q=INDEXSP:.INX
See those “all-time highs?” They’re basically continuous from ’77 to ’87, from ’89 to 2000, and for the last four years. Imagine if you are sitting there in 1991 with stocks at an “all-time high” waiting for a pullback. You really think you have the discipline to wait until 2002? And here’s the best part…the price you could get in 2002 was twice what you could get in 1991. Don’t fear “all-time highs.” They’re normal.
Great suggestions. We also use Mint so that we only have to log in one time to see all the activity on all our accounts.
I’m going to throw a controversial one out there – after your first few books/blogs have shown you the data regarding the value of saving, the concept of hedonic adaptation, low fee mutual index funds, total returns of asset classes over time, value of level term life insurance and when you need it, which strategies REALLY protect assets, etc – let’s say 2 books and one or two blogs….
THEN reading more about PF is unlikely to save you much more money. If you don’t just read these things for pleasure, you could simplify your life by not reading more of them.
Just a thought to get the fans riled up…
🙂
While the law of diminishing returns definitely kicks in, I think a certain amount of ongoing Continuing Financial Education is required unless you’re using an advisor. But I think perusing what’s been published on a good blog or forum once a month plus one good financial book a year is probably adequate. I think your initial education probably needs to be more than 2 books as well.
I will confess that thus far, my CFE consists solely of the WCI book, the WCI blog (to be fair, I did read all the posts even if it meant some skimming), and the WCI forum 🙂
I second Stu’s question, can someone please enlighten us on the tax consequences of monthly contributions to taxable account??
I believe he is talking about the consequences of having multiple small tax lots when it comes time to tax loss harvest. Having 1000 lots of $100-200 purchases would be really difficult to sift through and decide what to harvest. I don’t think $5,000-$6,000 purchases would be considered small. But I could be wrong.
Hog wash I say.
If you use any common brokerage house, you tax lots are easily exported into turbo tax or whatever software you use. It take 0 extra effort.
Rat’s Nest Cave…did the kids go down the “Birth Canal?”
Yes they did, and so did I. It dips at just the right place for an adult to get through.
rebalancing yearly and/or more often if it really goes out of whack should be followed; swedroe discusses this in his book
you can always learn more by reading periodically
I just read from james lange how to strategize if the stretch ira is eliminated-can save you and heirs tens or hundreds of thousands
I also read ss made simple by mike piper-lots of useful info for me about spousal benefits as well as more worthwhile info
yes-reading about stpck/bond investing is not necessary after you know modern portfolio theory
keep self educating
Per #4, Michael Kitces has a different take on rebalancing; “Optimal Rebalancing With Tolerance Bands”, http://www.fa-mag.com/news/optimal-rebalancing-with-tolerance-bands-29623.html
I’m not sure that’s a different take. That’s how I rebalance. But if you want to spend less time on your finances, it saves time to do it based on time, and the longer the time period between rebalancing events, the less time you spend on it.
Number 3 became important to me after seeing my wife’s inheritance — more than 2 dozen mutual funds, several annuities, multiple bank accounts, multiple life insurance policies. It wasn’t a large amount just spread out too much. I’m reducing my investments to one account (each) and 4 funds.
Thank you for confirming my gut feeling on the HSA. I know the “scan and save receipts for years, allow $ to grow tax-free, and withdraw it all years later” approach is financially optimal.
It’s not hard to enact, but it is time consuming, and there’s the risk of losing the receipts (and scanned backups) and the tax-free withdrawals. I’ve concluded it’s no longer worth the time and effort to save about $50 in taxes per $10,000 of eligible receipts.
Time to take back time!
-PoF
Hey PoF,
It probably doesn’t matter to have HSA-eligible receipts saved up for years and years – in my case I’m planning to use the HSA for future (age 65+) costs and/or Medicare premiums, i.e. all future but then-current expenses. But I love my Fujitsu scanner which is set up to scan directly to Dropbox (HIPAA-secure version), there should be no concern about lost scans!
Even easier than scanning is taking a photo with a cellphone.
For most phones, the photos are automatically uploaded to the cloud.
If you are particularly paranoid, you can run 3 different apps that can do this (Dropbox, iPhoto / iCloud, and Google Photos will all automatically back up any photos)
All 3 sort the photos by date so there is no need to go back and rename the files. If you are particularly OCD like I am, you can always go into those services once a month to move receipts around. (I keep different folders for health expenses, home office receipts, gift receipts, gas / business mileage receipts / etc)
It’s been fun watching your thought process evolve over these last several years, WCI. I made a New Year’s resolution last January to put finance on the back burner this year. It has been a great move personally and financially. Less tinkering helps returns and gains time. Best wishes to all this holiday season!
We all change, don’t we. I need to be careful to make sure all changes are for the better. I had an email the other day suggesting my blogging tone was changing for the worse, so I’m trying to watch that more carefully.
As I remind my kids, the only constant in life is change, so make it your friend. Your tone has changed, but it is just different now – not better, not worse, just reflective of where you are at this point in your life.
Good post. There are times when we over think investments, budgeting and saving. Now I am still an active manager in all senses but there is value in simplicity.
How about this? Automate Roth/IRA, 401k (employer and employee), HSA, 529, and whatever taxables you have. And then don’t worry about anything else because that much saving will take care of you in retirement. Spend the rest and enjoy it. Learn the value of your time and health. Trying to save a few dollars by spending two hours on internet is not the wise use of your time, and neither is risking your life trying to clean the gutters yourself.
I’m into the “miles and points” game big time, including using many different credit cards to maximize rewards. Initially, I found it was difficult to figure out whether I had already paid a bill, or to track my charitable contributions, cuz I couldn’t remember which credit card(s) I might have used. My “simplification strategy” is to continue using several cards, but always use the same card to pay all bills in a given category (for example pay all medical expenses with card A; make all small charitable contributions with Card B). I may lose a little in rewards, but the simplification is worth it. (Using Mint would have been another option.)
Also, regarding HSA’s – many readers of this blog will pay big Medicare premium surcharges once they retire (Medicare premiums can go as high as $500/month). An easy way to “spend down” a significant HSA balance over time is to reimburse yourself for your Medicare premiums and large deductibles.
I’m one of those that like to use different credit cards for different categories depending on the reward being offered. I realize it’s a trade off with time in doing so but I actually “enjoy” playing the game.
One thing I find that really simplifies this is to arrange your credit cards and all bills to pay on the same day of the month. Ideally also to have your credit card statements close on the same day of the month.
Finally, Auto paying the balance due and auto paying other bills as much as possible really simplifies things. I just make sure all my charges are correct by using personal capital to monitor my transactions.
Thank you for the tips. Saving money in this times is a highly meritorious act. And these six ways are just some of the several avenues to keeping up with economic disturbances and turbulent times. Thank you for a well done acticle.