As investors we face a constant barrage of information every day that triggers our urgency instinct. The urgency instinct makes us want to take immediate action in the face of a perceived imminent danger.

This instinct must have served us well in the distant past. If we thought there might be a lion in the grass, it wasn’t sensible to stop and analyze the probabilities. We needed to act quickly with the information we had.

Urgency instinct is still useful today when we need to take evasive action, but it can backfire when it comes to making complex decisions.

In his book Factfulness: Ten Reasons We’re Wrong About the World–and Why Things Are Better Than You Think, author Hans Rosling shared a painful yet important story about controlling our urgency instinct.

Working as the only doctor in Nacala, a district of more than 200,000 extremely poor people in Mozambique, Rosling diagnosed hundreds of patients with a terrible, unexplained disease that had completely paralyzed their legs within minutes of onset and, in severe cases, made them blind.

Not 100% sure the disease wasn’t contagious, Rosling met with the mayor to discuss their options. “If you think it could be contagious,” the mayor said, “then I must avoid catastrophe and stop the disease from reaching the city.”

The mayor was a man of action. He stood up and said, “Should I tell the military to set up a roadblock and stop the buses from the north?”

“Yes,” said Rosling. “I think it’s a good idea. You have to do something.”

The mayor disappeared to make some calls. The next morning, some 20 women and their youngest children were already up, waiting for the morning bus to take them to the market in Nacala to sell their goods. When they learned the bus had been cancelled, they walked down to the beach and asked the fishermen to take them by the sea route instead.

The fishermen made room for everyone in their small boats and sailed south along the coast. Tragically, nobody could swim and when the boats capsized in the waves, all of the passengers drowned.

That afternoon Rosling headed north again, past the roadblocks, to investigate the strange disease. Along the way he came across a group of people pulling bodies out of the sea. He ran down the beach to help, but it was too late. He asked one of the villagers, “Why were all these children and mothers out in those fragile boats?”

“There was no bus this morning,” he said. Several minutes later Rosling could barely understand what he had done, and 35 years later still never forgave himself.

Why did he have to say to the mayor, “You must do something?”

Rosling writes,

When we are afraid and under time pressure and thinking of worse-case scenarios, we tend to make really stupid decisions. Our ability to think analytically can be overwhelmed by an urge to make quick decisions and take immediate action.

Recognize when a decision feels urgent and remember that it rarely is. To control the urgency instinct, take small steps:

• Take a breath. When your urgency instinct is triggered, your other instincts kick in and your analysis shuts down. Ask for more time and more information. It’s rarely now or never, and it’s rarely either/or.
• Insist on the data. If something is urgent and important, it should also be measured. Beware of data that is relevant but inaccurate, or accurate but irrelevant. Only relevant and accurate data is useful.
• Beware of fortune-tellers. Any prediction about the future is uncertain. Be wary of predictions that fail to acknowledge that. Insist on a full range of scenarios, never just the best or worst case. Ask how often such predictions have been right before.
• Be wary of drastic action. Ask what the side effects will be. Ask how the idea has been tested. Step-by-step practical improvements, and evaluation of their impact, are less dramatic but usually more effective.

As investors our instincts are constantly put to the test. Like during the last quarter of 2018 – when the market bottomed out on Christmas Eve after nearly a 20% decline. Or during the onset of the pandemic, when markets crashed 34% in March 2020. Or in 2022, when stocks and bonds crashed after Russia invaded Ukraine and central banks began hiking interest rates to curb inflation.

Gloomy headlines often proclaim the worst days ever for the stock market, while market pundits almost gleefully predict more pain in the future.

Did you act on your urgency instinct and make changes to your portfolio during any of those periods? Cut your losses and move to cash? Or did you control the urge and stick to your plan?

Patient investors have always been rewarded handsomely for staying the course. Despite the volatility and some doom and gloom, a global stock portfolio would have earned an annualized return of 10.13% over the past 10 years.

Final thoughts

“Back in Nacala in 1981, I spent several days carefully investigating the disease but less than a minute thinking about the consequences of closing the road. Urgency, fear, and a single-minded focus on the risks of a pandemic shut down my ability to think things through. In the rush to do something, I did something terrible.”

We spend years carefully crafting our investment strategy, saving diligently, and promising ourselves we’ll stick to our plan through thick and thin. But all of that planning can be wiped away when something triggers our urgency instinct and forces us to act irrationally.

Maybe you heard about an investment opportunity and had to ‘act now or lose the chance forever.’ Or, the slightest market correction triggers financial crisis flashbacks and you panic.

Relax. Take a breath. Things are almost never that urgent – especially when it comes to investing.

As the late Jack Bogle once said, “don’t just do something, stand there.”

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!