In his best selling book, The 4-Hour Workweek, author Tim Ferriss explains how outsourcing your to-do list can result in a more ideal work-life balance. Instead of being glued to your phone and email like most busy professionals and entrepreneurs, Ferris recommends delegating the time-consuming, unpleasant, or simply boring tasks in both your professional and personal life.
“Just as one example, if you can find someone, let’s say, to compile Excel spreadsheets for you for $12.50 an hour, if you make $25 an hour, that’s an immediate 100% return on investment – not to mention what you were able to do with the time you free for yourself.”
Ferriss would hire virtual assistants from India or the Philippines to handle repetitive tasks like scheduling interviews, doing research on prospective clients, and managing his calendar of appointments. It freed up his time to focus on the things he was best at or that he enjoyed.
Today it’s more and more common to outsource household tasks such as cleaning, laundry, car maintenance, lawn care, and even meal preparation. Yes, hiring a maid is no longer just for the wealthy. Many busy families pay for a cleaner to come in every week or two to vacuum, do laundry, clean bathrooms, and tidy the house.
Outsourcing your way to happiness
New York Times columnist Carl Richards broached the subject of outsourcing in this article titled, “Happiness = Hiring a Maid. Really?”
Richards quoted research which found that paying someone else to complete unenjoyable daily tasks could result in greater life satisfaction, and that outsourcing housework you dislike could even save your marriage.
But when Richards shared these findings with his friends and colleagues the idea was met with anger and hostility. His tax lawyer friend who charges $300 per hour still changes the oil in his car. Another friend who earned $50 per hour still bakes his own bread that he could easily buy with a $5 bill.
What was missing in the study is the satisfaction that comes from doing basic things well yourself. Why does everything have to fit into an economic model?
My experience with outsourcing
For about two years my wife and I hired a cleaner to come in bi-weekly and tackle the big cleaning jobs like vacuuming and cleaning the bathrooms. This was when our kids were younger and we just didn’t have the time (or energy) to stay on top of the household cleaning. It cost around $150 to $175 per month.
We stopped outsourcing household cleaning once both of our kids were in school. Besides the fact that we had more time to do it ourselves, we also found it stressful on the nights before the cleaner came. We’d frantically pick up everything off the floor and tidy so the cleaner didn’t think we were animals (We weren’t. We just had toddlers). It was too much.
I’ve outsourced lawn care on-and-off over the years. I don’t have the greenest thumb, for one, plus I often use my weekends to write and work on financial plans. In this case it’s a clear economic decision. Pay $75 per month for lawn care so I can earn many times that by writing an article or completing a financial plan.
Last summer I didn’t arrange the lawn care soon enough and our usual company was booked. I thought it would be easy to do the work myself but by August the grass was patchy and brown. Epic fail!
My wife makes her own sourdough bread. Yes, we know we can easily afford to buy bread at the store. But there’s something oddly satisfying about making something from scratch and knowing exactly what goes into it.
Finally, many online entrepreneurs I know have embraced the virtual assistant to handle various tasks such as scheduling, email, research, and graphic design. Aside from web design and maintenance I haven’t ventured down that path as my wife and I handle the day-to-day operations of our business. So when you send me an email you can rest assured it’s actually me (or my wife) replying to it!
Final thoughts
Outsourcing makes a lot of sense from an economic perspective. If you earn $60 an hour then why not pay someone $15 an hour to do an unpleasant or time-consuming task?
But where do we draw the line? Is your time still worth $60 an hour when you’re off the clock and home watching Netflix?
On the other hand, you shouldn’t feel bad about outsourcing things you generally dislike or don’t have the skillset to perform. I’ve never changed the oil in my car and will gladly pay $60 for someone else to do it.
Related: Worthwhile fees to pay
That said, some people take outsourcing to the extreme – to the point of outsourcing the reading of bedtime stories (<—father of the year!). But, hey, who am I to judge?
Is outsourcing the key to happiness? I think in many cases outsourcing some things not only makes economic sense but can lead to a happier lifestyle. It all depends on what you do with the time saved.
In some cases, like when I outsource lawn care to spend time writing, there’s a clear and direct economic trade-off. In other cases, like hiring a cleaner so you can spend more time with your family, it might be more of a lifestyle decision.
What tasks do you outsource? What do you insist on doing yourself? Let me know in the comments.
I work with a lot of young families who are trying to juggle the enormous pressures of paying off debt, saving for a house down payment, possible income disruption from taking a parental leave, moving, or changing careers, plus dealing with temporary but costly expenses like childcare, paying off a vehicle, or renovating a home.
Many are struggling to save and invest for the future because they’re just trying to stay afloat.
They’re also freaked out by ridiculous headlines showing they’ll need to save something crazy like $1.7M in order to retire comfortably.
On the flip side, many retirees have more than enough savings to meet their spending needs over their lifetime.
But instead of enjoying their retirement, they’re constantly on edge about the economy, the stock market, and inflation (among other things outside of their control).
To them, a comfortable retirement isn’t just about a number (and many of them do indeed have savings of $1.7M or more). The problem is their money psychology.
Imagine you spent your entire career dealing with financial anxiety – to the point where you developed a scarcity mindset and were always in savings mode.
How difficult do you think it would be to suddenly turn off the savings taps and turn on the spending taps in retirement?
The answer: Extremely difficult!
Think about it. If you’ve never exercised your spending muscles and just lived on, say, $50,000 throughout your entire 40-year career (while saving 20-40% of your income each year), how the heck are you going to go from spending $50,000 per year to spending $80,000 or $100,000 per year in retirement? It’s not going to happen.
In fact, I swear I spend more time trying to convince my retired clients to spend their money than I do working with them on optimal withdrawal strategies, tax planning, or their investment plan.
I don’t want you to have that type of relationship with money.
First, let’s acknowledge that it’s okay to save less in your 20s and 30s while you juggle competing financial priorities. In many cases, it’s impossible to consistently save 10% of your income for many years.
Related: The Rule of 30 approach to saving money
Adopting a staggered approach, where you might save 0% for a few years before ratcheting up your savings to 5%, then 10%, and finally 20% as your income grows and temporary expenses subside, allows you to do what economists call consumption smoothing – the idea that you maintain a relatively consistent lifestyle instead of depriving yourself during certain periods of high expenses, or instead of spending lavishly later in your career as those expenses ease and your income grows.
This aligns with what most of my retired clients say – that they want to maintain their current standard of living, if not enhance it slightly with extra spending on travel and hobbies for as long as possible.
Proper financial planning at appropriate times in your life can allow you to adjust course as needed to get your savings on track.
Finally, we tend to vastly underestimate how much we’ll receive from government programs like CPP and OAS. In many cases, these benefits can total up to $20,000 per year or more for individuals, and up to $40,000 per year or more for couples.
That helps take the pressure off having to save something ridiculous like $1.7M for retirement.
This Week’s Recap:
Last week I wrote about making the best of the bad mortgage options out there today. We chose a 1-year fixed rate and look forward to renegotiating next spring.
Thanks to Rob Carrick for highlighting my article on how to choose the right asset allocation ETF in his latest Carrick on Money newsletter.
Now that we have our finances more or less figured out for this year and beyond, I took some time this week to look at our saving and spending plan for the remainder of 2023 and into 2024 (yes, I have a spending plan in place for 2024).
Then I did what I find a lot of small business owners are reluctant to do. I gave us a raise.
My wife and I pay ourselves dividends in equal amounts to keep our taxes low and to simplify our finances. But we moved into a new house and took on a larger mortgage (at almost triple our previous interest rate). We made a promise to ourselves that we would still be able to live the life we enjoyed before buying this house, which meant continuing to spend money on travel, and still meet some personal savings goals like funding the kids’ RESPs and contributing to our TFSAs.
What that meant was our previous plan to pay ourselves $7,000/month in dividends wouldn’t cut it, so we bumped that up to $7,500 per month. Interestingly, that’s about a 7.1% increase from last year which would be somewhat inline with a proper inflation-adjustment (CPP recipients received a 6.5% increase in their benefits in January).
I think it’s important for business owners to pay themselves appropriately to meet their personal spending and savings goals. Too often, business owners leave this up to their accountants who may advise leaving as much money as possible inside the business rather than paying taxes personally. But, hey, you need to eat, and heat your home, and travel, and pay for your kids’ activities, and contribute to your RRSP or TFSA. Make sure you pay yourself accordingly.
Weekend Reading:
A Wealth of Common Sense blogger Ben Carlson explains why the stock market is not a casino:
“The stock market is the opposite of a casino. The longer you play, the higher your odds of success in terms of experiencing positive returns on your capital. The ability to think and act for the long-term is your edge as an individual investor. Patience is the ultimate equalizer.”
Investment advisor Markus Muhs bluntly says that investors should stop gambling on stocks. I agree 100%. We often sweat over the smallest details, like saving an extra 0.04% MER on a globally diversified ETF, or saving $4.95 per trade, but then turn around and dump 10% of our hard earned savings into individual stocks. I don’t get it.
Speaking of sweating over minor details, Justin Bender says that many DIY investors may be tempted to sell their all-equity ETF to save on fees – purchasing the underlying ETFs directly instead. Before taking the plunge, check out this video for several reasons why you should just stick with a single ETF:
Roc Carrick explains why firing your investment advisor to buy index funds could backfire (subs). I may be biased, but a DIY index investor pairs quite nicely with a fee-only financial planner that you can hire as needed to check in on your finances and update your financial plan. Just sayin’…
Here’s Squawkfox Kerry Taylor on why material things won’t make you happy (and what will).
Fee-only advisor Anita Bruinsma says if you’re experiencing a challenge with your money then you need to take an honest look at yourself and your numbers and face the facts.
PWL Capital’s Ben Felix explains why covered call ETFs sound too good to be true – because they are. Avoid ’em.
If you’re buying a new home and thinking about renting out your old one, don’t make this crucial mistake. Definitely not a strategy for me!
These are the biggest myths in personal finance — and they’ll cost you if followed blindly. Nice piece by Jason Heath.
Millionaire Teacher Andrew Hallam on how a cycle crash led to an important lesson in business and life.
Finally, why rethinking retirement might help solve Canada’s demographic crunch.
Have a great weekend, everyone!
We’ve finally moved into our new home and received the proceeds from the sale of our previous home. To recap, last year we entered into a purchase agreement to build a new house. We arranged our financing so that we didn’t have to sell the home we were living in to qualify for a new mortgage (avoiding the annoyance of potentially selling too early and having to find short-term accommodations before taking possession of the new house).
To do that, we took out a line of credit on the house we were living in and arranged for a new “draw mortgage” so we could make deposits on the new house as it progressed. The draw mortgage was held at TD in their Flexline product at TD’s prime rate. Needless to say, things got a bit dicey for this personal finance blogger as interest rates soared by 4.25% this past year.
We put our house on the market at the end of January and sold it at the beginning of April for 2.5% below the list price. The buyer’s possession date worked out great – one week after we took possession of our new house.
All-in-all, while the process was stressful given the rapid rise in interest rates, the end result came close to my most optimistic financial outcome (hey, I’m a planner after all).
We put a chunk of the house proceeds down on the Flexline loan and were eager to switch that into a conventional mortgage term. I reached out to friend-of-the-blog and my go-to mortgage expert Rob McLister for some guidance on what to choose in this currently craptacular mortgage environment.
My typical mortgage strategy is to take the best of either a five-year variable rate or a short-term fixed rate. The idea being that variable rate terms tend to perform better than fixed rate terms, but sometimes you can’t get a good discounted variable rate so by going with a 1-or-2-year fixed rate you get a chance to negotiate again sooner than later.
Rob confirmed that strategy was indeed wise and shared the current best available rates:
“Were it me, I definitely would not go past three years and would likely bite the bullet on a 1-year fixed at 5.74% +/-. A lot of banks are quoting 3-year rates at 4.85%. That’s as far out on the curve as any qualified borrower should go. HSBC’s variable at prime minus 0.80% is decent. It has a great no-penalty break policy after 36 months. But based on the market’s implied forward rate outlook (for what that’s worth) a 1-year does a little better on paper, albeit with somewhat more rate risk upfront.”
Rob suggested to stick with a short-term fixed rate and ask TD to beat the best rate I could find elsewhere. That’s exactly what I did when I met with TD last week. Indeed, they matched RateHub’s 1-year fixed rate term at 5.74% (remember, this is an uninsured mortgage as we’ve put down well over 20%).
So we got the best of the bad mortgage options available today. We’ll see how the next 12 months go, and if we do get that elusive recession and/or inflation finally comes back down to target then hopefully we’ll see a drop in mortgage rates next year when we have to renew.
This Week’s Recap:
Last week I shared five investing rules to follow (in good times and bad).
I’m trying to be more active on Instagram and have an Ask Me Anything going on for the next 24 hours in my stories if you want to give me a follow and check that out.
Promo of the Week:
American Express routinely has the most lucrative travel rewards offers on the market and the current promotions for their premium cards are strongly worth considering for travel hackers.
We just booked a premium economy flight to Edinburgh (our favourite city) this summer, as well as business class tickets returning from Amsterdam. All in part to the number of points we earn from American Express cards.
First up, the American Express Aeroplan Reserve Card where you can earn up to 120,000 Aeroplan points (that’s up to $2,400 in value).
Earn 50,000 Aeroplan points after spending $6,000 within the first 3 months. Plus, in the first 6 months, you can also earn 7,500 Aeroplan points for each monthly billing period in which you spend $2,000. That could add up to anther 45,000 Aeroplan points. Finally, you can also earn 25,000 Aeroplan points when you make a purchase between 14 and 17 months of Cardmembership – an incentive to keep the card beyond the one-year mark.
Next we have the American Express Platinum Card, where you can earn up to 90,000 Membership Rewards points when you charge $7,500 in purchases to your Card in the first three months. Membership Rewards can be transferred to Aeroplan on a 1:1 basis, so 90,000 points can be worth up to $1,800 in flight rewards.
For business owners, there isn’t a more lucrative card than the American Express Business Platinum card. It has a high minimum spend requirement – $10,000 in the first three months – but if that’s doable for you then you can earn a cool 100,000 Membership Rewards points.
Finally, while not a new offer, the Amex Cobalt card is the best everyday credit card on the market and my go-to card for spending on food and drinks. Spend $500/month on groceries and you’ll not only max out the 30,000 point welcome bonus but you’ll also earn another 30,000 points from the regular spending. Transfer those 60,000 points to Aeroplan and get up to $1,200 in value from redeeming flight rewards.
Weekend Reading:
After a friendly inflation print for April (coming in higher than expected), borrowers are now concerned about another interest rate hike. Rob McLister explains why that may be disastrous for variable rate mortgage holders.
We often see how Canada Pension Plan is well funded and sustainable for at least the next 75 years. But what about Old Age Security, which is funded by general revenues? Here’s why Canadians can trust that they’ll continue to receive OAS benefits, even with countless economic challenges.
And here’s why you likely won’t get the maximum CPP retirement benefit (subs).
Barry Ritholtz looks at 10 bad takes on this current market.
Anita Bruinsma explains why Canadian investors need exposure to international assets.
Advice-only planner Andrea Thompson looks at a tale of 4 RESPs.
PWL Capital’s Justin Bender offers a helpful comparison between XEQT and VEQT to help you decide between these popular all-equity ETFs:
For business owners – should you pay yourself a salary or dividends (or a mix of both)? This paper looks at the optimal compensation structure for business owners residing in Ontario.
A new paper on finfluencers says investors flock to loudest, least skilled voices on social media. Yikes!
Hey, the 60/40 portfolio is back! (after never going away):
“One outlier year every 4 decades or so makes for a pretty reliable investment strategy. The academic evidence that this sort of investing outperforms all others over a long enough timeline is overwhelming.”
Kyle Prevost at Million Dollar Journey lists eight things you must do to prepare for the death of a spouse.
This is a must read – How retirees can overcome ‘irrational’ saving and enjoy their money:
“The so-called “retirement consumption gap” often stems from an inability to switch off a saving mindset and fears of running out of money, especially as the cost of living rises and people live longer.”
Trying to make up for stock market losses can be costly, impulsive and misguided. Here’s why you keep chasing the wrong stock market.
Finally, a conversation with former Bank of Canada Governor Stephen Poloz on how to adapt to the age of uncertainty. The bottom line: the future is risky, but we’re going to be fine.
Have a great long weekend, everyone!