I am 99 percent sure that I don’t need to make the case among the financial independence crowd to live a do-it-yourself (DIY) lifestyle, so not to worry — this isn’t that post. You’re already a fan of DIY. So are we. So is everybody here. Group hug!
Instead, this is about a contradiction in some of conventional wisdom that’s out there about how you achieve early retirement or [insert your fantastically gigantic financial and life goal here]. Which, in short, is this:
Part 1: We’ve all figured out that the traditional financial services industry isn’t necessarily working for us, its customers, it charges high fees that can erode the growth of our wealth, and even actively managed mutual fund managers themselves invest in passively managed index funds. Therefore, the best course is to manage our money ourselves. (DIY!)
Part 2: At the same time, we have a lot to think about: whether we trust the 4 percent rule, what withdrawal strategy to use when we’re in the spend-down phase to stretch our money the farthest, whether to use tactics like tax loss or tax gain harvesting, how best to employ the backdoor Roth conversions, whether it’s better to pay off debt like mortgages as quickly as possible or invest that money to allow it to grow, etc., etc., etc. (Optimization!)
In General, Optimal = Outsourced to a Specialist
The entire basis of the modern economy is labor specialization. In other words, that we allow some people to get really good at doing this one thing so that we don’t have to worry about it. They, in turn, can get more efficient, production goes up, prices go down and everybody wins. We do the same in whatever job we’re focused on, that person over there is busy getting awesome at their task, and across the economy as a whole, we optimize by not doing things ourselves. It’s how we can all get kale in the winter, and cars with heated seats, and iPhones and Pixels, and electricity from nuclear and solar power. None of that would be possible if we all had to build our own homes, grow or hunt our own food, procure our own sources of energy, make our own clothing and educate our own kids.
Most of us who enjoy seeing life through a DIY lens aren’t expecting to do everything ourselves. That’s madness. I, for one, have no desire to live without toilet paper, but I’m pretty sure that’s what would happen if we had to fell our own trees, grind up the wood into pulp and process it into finished paper. Thank you for your important work, paper producers of the world. I’ll never quit you.
The Suboptimal Trade-Offs of Do-It-Yourself (DIY)
Engaging in the modern economy involves a tacit acknowledgement that the optimal way is generally the non-DIY way. And when we DIY things, we usually know what we’re trading. Almost certainly it will take longer than if we pay someone else to do it. We might/probably won’t do as good a job. (The local deer ensure that I will never grow kale as perfect and pretty as what I can buy at Whole Foods.) We might fail altogether and have to pay a specialist in the end anyway. (Ask us about the time the house filled with smoke after our first attempt at DIY chimney cleaning. You can bet we called the pros after that.) And it might, in fact, not even save money. (Every dress I’ve ever sewed has definitely ended up costing more, after the pattern, fabric and thread, than if I’d bought one at Old Navy or the thrift store.)
But there’s something DIY provides that no outsourcing ever can, something that very often makes it worth all that extra effort and maybe the suboptimal outcome: Pride in doing that thing ourselves. But pride isn’t something we can quantify, which makes it a strange bedfellow for conversations about finances.
DIY, Optimization and Money
On this topic in particular — managing our own money — it’s an interesting pickle we put ourselves in. We expect to do this thing ourselves, because we believe we can do it better than the pros, or at least as well but cheaper. For reasons that have nothing to do with that pride, we believe we can both DIY our money and optimize it.
You know what I think? We can’t.
We can’t both manage our money ourselves and optimize it. But that’s okay! And moreover, we shouldn’t even really try, because that’s an impossibly high standard. So just in case you need it — and I’m not saying you do — here’s permission from me:
You do not have to optimize everything about your money to be successful at managing and growing it yourself.
Those of us who don’t work in financial services don’t have access to the analysis and data that the pros have. Most of us don’t have the economics credentials to weigh the merits of various opinions and studies about the long-range prospects of the labor markets and GDP growth. Assuming most of us have net worths somewhere south of $10 million, we can’t buy into some of the highest growth potential hedge funds and private equity holdings. I could go on. But none of this is the point. The point is that, even with our money, we shouldn’t be aiming for full optimization.
We should be aiming for good enough.
Because we do not actually need fully optimized money to make an early retirement plan work. All we really need to do is beat inflation. We can do that whether we prefer index investing or dividend investing, or house flipping, landlording or side hustling. We can do that whether we choose to pay off the mortgage on a house, invest that money instead or stay renters for life. We can succeed at retiring early even if we make some mistakes along the way, miss out on growth opportunities and make some choices because we followed our guts and not the math.
Is Optimized Money Even Possible?
Let’s take this a step farther, because there’s something I’ve learned over the past two decades of attempting to be an adult who possesses money, which is this:
Just as there’s no way to live a risk-free life, living a fully optimized life with fully optimized money is simply not possible. Every choice we make has a trade-off, almost always a negative one.
Take the 10 years I side hustled. I earned a decent supplement to our income, but it ate into my free time in a big way, and I got very little sleep in those years. Or how last year, our penultimate full-time work year, we decided to keep our heads down, work as hard as we could to maximize income and forgo most vacations to maximize our savings. Sure, we optimized our money, but we paid the price with lost sleep, lost happiness and a serious toll on our relationship. I’ve heard from others that the time they spent focusing obsessively on their finances is time they regret spending away from their young kids or spouse.
There’s never been a time when we’ve optimized our money without making an unacceptable life or health trade-off.
And that’s why we stopped trying to optimize at all, and instead shifted our focus to embracing the suboptimal, and finding the balance that’s right for us.
Embracing the Suboptimal
Just like health isn’t something you can plug into a spreadsheet, the suboptimal life-money balance isn’t something you can quantify either. It’s something you have to feel out, based on your own weighted factors.
The key for us has been acknowledging the trade-off on the front end instead of glossing over it. Instead of saying, “Well obviously we want to make money faster so we can retire as quickly as possible,” (a completely reasonable thought to have), we now say, “We’d love to make more money faster, but what would we be trading to do that? And would it speed us along enough to be worth it?”
That’s meant that in this last year of work, we’ve made a bunch of suboptimal choices, at least from a money perspective. We took a fairly expensive trip to Japan because we needed the break in a bad way, and wanted one last international trip in which we weren’t too worried about stretching every penny — and we loved every second of it. We haven’t worked quite as hard at every turn as we could have, letting others be the first to raise their hands to take things on, knowing that our year-end (career-end!) bonuses will be smaller as a result — but not being quite as exhausted as last year has made it totally worth it. And we haven’t taken out a HELOC on our paid-off house, as many of y’all have insisted we need to do, crystalized the perfect withdrawal strategy, refinanced our rental to a 30-year loan to free up cash flow, or any of the other many things we could do to fully optimize our money. But we don’t regret a thing, because doing any of those things would have come at the cost of energy, time and mental space that we’d rather allot to other things right now. Instead, we’ve spent that time and mental capital on things like self-care, time together and creative (and definitely financially suboptimal) projects.
And that’s another big thing we’ve learned: It helps not just to accept that we can’t optimize everything, but to go the full distance and embrace the suboptimal.
Instead of beating ourselves up about not refinancing the rental house, or just resigning ourselves to the fact that our to do lists are too long and that project isn’t a big enough priority, we now try to think in terms of the positive side of the trade-off. In other words, we focus instead on what we’re keeping or gaining by not doing the optimal thing. So it’s not “Man, wish we had time to do everything we’d like to do financially. Womp womp.” It’s, “Sure, we could have refinanced the rental, but that would take so much time, and instead we got to go on three great hikes and read that book we loved.”
Speaking of Financially Suboptimal DIY Projects…
I made something that I’m excited to share with you guys, and this won’t be the only time I talk about it. But it’s the first! So hooray!
We’ve been planning for months to do a contest in advance of our big reveal to let people guess in a more official way than comments and emails where we live. And contest means prize, but we couldn’t decide on a prize that felt right for us. We didn’t want to force folks to buy things, as an Amazon or Visa giftcard would. We didn’t want to give money to invest if what the winner really needed was money to pay off debt. And then continue down the list… not everyone drinks coffee, or shops at Home Depot, or buys music on iTunes, and on and on.
And none of those things really felt like us anyway. I think (and hope) that you read Our Next Life because you get something here that’s slightly different, if only because I share our story, and that story is unique to us. I decided right from the get-go that I was never going to try to write “finance 101” content, or make clickbaity lists or insult your intelligence by telling you about the one right way to do or think about something. I wanted to get more into the gray area — that suboptimal middle — and focus on the thought processes and trade-offs instead of pretending to have the answers.
Reflecting on all of that made me realize that I only wanted to give out a contest prize if it was something I could actually make myself (DIY!), just like I make everything that shows up here. (Not including the WordPress theme code. One day!) And fortunately, I have some skillz that came in handy in this moment.
Presenting our first swag, the totally suboptimal, DIYed Our Next Life t-shirt!
Sure, having a factory print it would make the lines crisper and the ink less blotchy. (Hey! It’s distressed!) But by making the stencil myself, and screening every shirt myself, I know that I’m sending out something that reflects what I value, and those who receive it will know that I made it just for them. That may not be an optimized way to go about things, but it feels like the right balance for now.
This shirt isn’t for sale — yet! It’s time-consuming to print and heat-set shirts, and to ship them, but stay tuned in the new year, when we have more time on our hands, for news on how you can buy one of these. But in the meantime, you can win your very own!
The “Where In the World Are the ONLs?!” Contest!
We’re now under a month until we share with you guys our true identities, but while we’re in this last few weeks of limbo, let’s all have some fun with it!
NOTE: THIS CONTEST IS NOW CLOSED. STAY TUNED FOR THE ANNOUNCEMENT OF WINNERS IN OCTOBER!
This is your opportunity to register your guesses — where do we live? what do we do for work? what other fun facts do you think you’ve pinned down about us? — for a chance to win the brand-spanking new, totally custom-made ONL t-shirt, before anyone else has a chance to get one!
Are we giving away just one shirt? Heck no! We’re giving away a bunch of shirts!
Here’s how it works: We’ll randomly choose one winner in each of several different categories:
- Those who guess our correct state who don’t already know for sure
- Those who already know what state we live in but enter the contest anyway
- Those who correctly guess our more specific locale who don’t already know
- Those who correctly guess what we do for work who don’t already know
- Those who comment on today’s post, preferably what mountain town you would choose to move to if you had to move to the mountains, and why (but any non-spam comment counts!)
- Those who subscribe to the email newsletter between September 1 (retroactive) and 11:59 p.m. Eastern time on September 30, 2017. (Note: Different time zone cutoff from contest entries via the survey and comments here.)
And one non-random winner (#7) will be chosen who gives the most creative (and at least partially accurate) answer to what fun fact you’ve guessed about us without us ever having mentioned it on the blog.
That’s seven shirts!
Entries will be accepted this week only, and will close at 11:59 p.m. Pacific time on Saturday, September 30, 2017. Winners in the U.S. and Canada will receive a free t-shirt and free ground shipping, and if there are winners in other countries, we’ll give you the option of receiving the free shirt but paying the difference between U.S. shipping and shipping to your location, or doing a Skype chat with us instead. Winners will be able to select from a few different t-shirt styles and colors (I’m partial to the ringer tees), and choose their size. And if you’re just not a t-shirt wearer, I can print a tote bag for you instead. Winners will be announced after our reveal, on or after October 23, 2017.
Bonus: When we do the big reveal in a few weeks, we’re going to include a cluster map of everyone’s guesses, so the more of you who fill out the short form, the more data we’ll have for the map.
T-shirts number 1 through 5 will be awarded based on the entry form (link disabled now that the contest is closed). T-shirt number 6 will be awarded based on subscribers to any of the email forms on the site, or by selecting yes on the last question of the contest form. And t-shirt number 7 will be awarded based on comments on this post (reminder: What mountain town would you choose to live in and why? Or any comments you have on the post itself!).
Get entering! And good luck!
(And anyone else have the Where In the World Is Carmen San Diego? theme song in your head now? I totally do.)
Categories: gearing up