Read Time: 4.5 minutes
Welcome to the 38th edition of the Tech Financial Planning (TFP) newsletter.
Most people focus on their ROI (Return On Hassle), but you also have to consider your ROH.
Your Return on Hassle
In this newsletter, we’ll break down what Return On Hassle is, and go through a couple examples to put it into practice.
TL;DR
Return On Hassle measures how much time & energy you will have to spend to save/earn money
In a desire to be good stewards of our money, we can take it too far
3 examples I’ve seen where people take this too far are trying to find the perfect high yield savings account, looking for the lowest car loan, and some ESPPs
A Personal Story
Nice job by me keeping my eyes open
Carly and I got back from a week of family vacation last Sunday.
Our flight was delayed a couple times and we landed after 11 PM.
In short, we were cold, tired, and hungry.
As we left baggage claim, I fired up Uber and was shocked to see that it was $46 for the same Uber that cost us $22 just a few days earlier.
Curse you, surge pricing!
Ever the saver that I am, I opened up Lyft to see if that would be cheaper.
It was ($23), but it came with a catch - it was 18 minutes away.
While Uber was only 2 minutes away.
Trying to be “smart” (whatever that means), I chose Lyft.
Spoiler alert: this was not the right decision.
As we sat there in the cold, I realized that it would be better to bite the bullet and pay the extra money to get home sooner (and get some food and go to bed).
So I canceled the Lyft and got the Uber.
Thankfully the karma gods were smiling down on me and Uber had dropped to $30.
But even if it hadn’t, was it worth $23 put a damper on the end of our vacation, just to save a couple bucks?
If this was college Joe, back when I barely had $50, then yes, I’d do a lot to save $23.
Now, not so much.
Enter Return on Hassle
As we go through our lives, we also must consider the return on hassle.
The Return on Hassle (ROH) is the amount of money you will save or earn divided by the time, money, and brain damage it takes to get there.
Mitchell’s thread has some examples of low ROH activities:
Trying to get the perfect withholding to not give the government an interest free loan
Series I savings bonds
Complex business structures
Overly complex estate plans
I’d like to add 3 other examples that I think are relevant.
Example 1: Trying to find the perfect high yield savings account
It doesn’t make sense to switch every time you see a new account with a higher interest rate.
Find a good high yield savings account and stick with it.
Don’t worry about finding the perfect account with the best interest rate.
$50,000 at an account making 4.5% versus a 4.15% rate will make you an additional $175 over the course of a year.
Yes, you might make an additional $175, but you have to factor in
The time it took
The mental energy you expended
Creating and tracking new accounts and passwords
Additional tax forms
Probably not worth it for an additional $175.
Example 2: Finding the lowest possible car loan
This will be similar to our last example.
Let’s say you are looking to buy a $40,000 car and you will put $10,000 down.
So you are financing $30,000 over 4 years.
I’ll take an extreme example here comparing a 4% loan and a 6% loan.
The 6% loan results in an additional $1,304.60 over 4 years.
That’s $27 / month.
Not nothing, but this is an extreme example.
You don’t need to grind to save every penny.
Example 3: Some ESPPs
Not all ESPP’s are created equal.
Meg Bartelt has a great blog post on this
Two quick examples
Let’s say your ESPP has a 5% discount, but no lookback.
And let’s say you max it out, so over the course of the year, you put $23,750 in and get $25,000 worth of stock.
You made $1,250, again, not nothing.
But your money was locked up throughout the year.
If you don’t sell immediately, now your money is all in company stock and at risk of market fluctuations.
You had to spend time and energy figuring out what to do with the stock
If you had thrown that same $23,750 into a high yield savings account at 4%, you would have made $950, so you only came out $300 ahead.
Second example - I have a client who works at Wal-Mart
Walmart has their Associate Stock Purchase plan.
“It offers a matching program which offers a 15% match on all stock purchases made through payroll deductions, up to $1,800 each year.”
15%!
That sounds great!
Unfortunately, it’s only on up to $1,800.
If you put away the full $1,800, you would get $2,070 worth of Walmart stock.
You made $270.
My client decided it wasn’t worth it.
Putting It All Together
Our time and our energy are two of our most precious assets.
The point of this newsletter is to consider additional factors beyond just saving/making money.
And I do recognize a lot of this depends on your income and stage of life.
Like I said earlier, what I would do to save $20 in college (and basically broke) is very different now in my 30s and married.
Some of these may seem like no brainers, others might seem like a total waste of time.
But I’d remind you - don’t major in the minors.
Your energy is much better spent on increasing your income, saving more & investing well
We want to be good stewards of our money, but don’t be like me and take it too far.
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