2/10 effort for 8/10 outcomes | Personal Finance

The list of areas I seek to optimize has become fewer and fewer over time. As I reflect on the year that’s gone by, I’ve come to realize that this list is down to just two areas – work and family. As much as I’d like to include self-care/fitness on the list, I can’t do that with a straight face.

For everything else, I’ve operated with what I consider the satisficer credo – expend 2/10 effort for 8/10 outcomes and make peace with the fact that these outcomes will never be a 10/10.

In practice, this means accepting that, in areas like personal finance or travel, I’ll likely not have the best credit card or flight deal. Instead, I work with a collection of simple solutions that I don’t need to change very much.

So, I thought I’d document these solutions in a series of posts – my hypothesis is that there’s a series in here that culminates in a post with an updated set of life principles/mission statement (this might not work :-)).

And, I thought I’d get started with Personal Finance. The tactics in this one will be most applicable to folks in the US – that said, I’m hopeful the principles will hold. Also, I choose I and we interchangeably to mix it up – in our case, all “I” decisions have been”we” decisions since we got married.

1. One primary credit card – Chase Sapphire Reserve. I use one primary credit card – as of this year, it is the Chase Sapphire Reserve. Some optimizers I trust said it is among the best credit cards out there and I can see why – I have been impressed by the rewards. I was loyal to AmEx for nearly a decade – especially as they were generous with credit limits when I first came to the US. But, their rewards weren’t working out for us and I only have place for one primary credit card. I took a 20 credit score hit when I shut that card down. But, that’s the price I pay for simplicity. I’m sure it’ll work out fine in time.

2. Secondary credit card Amazon Prime Rewards Card. This was a 2019 experiment as it seemed like a no brainer to get 5% back on Amazon purchases. It is here to stay.

3. 2 bank accounts – a physical and online high yield savings: We set up a Bank of America account when we first moved – this remains our primary physical bank. We added an online bank account for high yield savings – Marcus by Goldman Sachs. This is another in the no-brainer category. 

4. Treat equity like a Cash Bonus: Many companies offer equity compensation. I choose to treat equity compensation as I would a cash bonus – rationale as explained here on the Wealthfront blog.

5. Simplify long term investing – 401(k), backdoor Roth conversions, and automated transfers for investments with Vanguard Advisory Services: We max out our 401(k), use backdoor Roth conversions, and automatically transfer the rest into Vanguard Advisory. Vanguard helps us  to help us with investments at a low cost ($3 for every $1000 under management). I’m not expecting them to help us beat the market and generate jaw dropping returns. But, I’m expecting them to help us save us from ourselves and do an 8/10 job in the long run.

6. 1 Google spreadsheet for all the math: As I’ve shared before, we maintain a simple Google spreadsheet to keep track of all our expenses and investments.

Now, here’s the interesting part – there are ways to optimize every one of these steps. You can have many credit cards which accumulate points in fascinating ways. You can do the same with a myriad of bank accounts. If you receive equity compensation, you can aim to buy and sell in ways that maximize your gains. And, of course, the biggest optimizations come in the area of investing – there are literally millions of possibilities.

But, there’s also limited time in the day and infinite ways we can spend this time. So, we are left with no perfect decisions. All we can do is understand the trade-offs and thoughtfully choose our path.

Implicit to the decisions we’ve made above is an acknowledgment that we’re not going to measure our lives by the amount in our bank accounts. We’re not going to be the folks with impressive year-over-year growth rates on our savings and investments. We’re also not going to be the folks who made millions of dollars with simple investments in crypto/insert-cool-new-thing.

Instead, the goal is to do the essentials, avoid stupid mistakes, and use the money we earn from our work to create the sort of life experiences that maximize quality time spent with loved ones, learning, and a positive contribution to problems that we consider meaningful.

This gets to the power of pursuing simplification in all but a couple areas in our lives. It helps us avoid time spent optimizing the things that don’t matter so we can create space for the things that actually do.

A bit of thinking, a lot of simplification

I’ve been using folders and about 8-9 email accounts on my Outlook for 8 years now. I never questioned it and always assumed that would be the norm. As I was reviewing my email set up 2 months back in the spirit of “what got you here won’t get you there,” I felt I needed to set up some thinking time to think about this.

I am beginning to appreciate the importance of setting aside to think about these things. It is almost impossible to do so when you are stuck in the “daily grind.” I love the daily grind but it isn’t ideal for digging deep and thinking.

I spent 2 sets of time thinking about email. This involved writing down the reasons why I used email, how I ensured the why’s were being met, and what my approach would be if I started all over again. My conclusions were as follows –

– Facilitate thinking and productive work –
On the one hand, this is working well. It helped reinforced my happiness with Outlook as I’ve found that the Gmail interface sucks my desire to work. However, on the other hand, I felt it called for much needed simplification. I’m down to 4 key email addresses I use a lot and I’ve set up email forwarding on 8 or so others (each project invariably had a separate email address)

Stay in touch and keep connected. Again, all good.

Search through past ideas, conversations, information. I do most of my search on gmail and realized I didn’t need desktop search anymore. Additionally, even if I did for a recent email, folders was only adding unnecessary baggage to the search. I had created folders as a part of an initiative to teach myself to be organized many years back. I’m happy with my ability to organize and they aren’t useful anymore.

So, I’m down now to a simpler Outlook interface – my primary folder is an “Archive” where I dump nearly everything that comes in. I have other folders – “Accounts,” “Feedback,” “Smile,” and “WIP” that I use for finances, 200 words project feedback, nice emails, and work-in-progress stuff. I have reduced my email use to 4 email ids – it feels light and easy.

This process didn’t take long – probably 3 hours in total – but has simplified a lot. I’ll also aim to share the results of my thinking around passwords and Lithium-ion batteries. A bit of thinking, a lot of simplification – loving it.