Sunday, December 21st 2014

Are You Spending Too Much Time On Personal Finance?

by Mr Credit Card

Well, if you are reading from the carnival, chances are that you have a PF blog as well. While I think it is a good thing to put in writing our thoughts and discoveries in the confusing world of personal finance, I wonder if I am (and I guess are we?) spending too much of our time on personal finance? (At the detriment of other things).

Peter Drucker wrote in “The Effective Executive” that “To be effective, every knowledge worker and especially every executive, therefore needs to dispose of time in fairly large chunks. To have dribs and drabs of time at his disposal will not be sufficient even if the total is an impressive number of hours”.

How much time are you spending on your personal finance?

Are you spending too much time on your personal finance at the expense of other more important things?

Why am I posing this question? The reason is because I recently met up with a very successful friend of mine. One of the things that he said really resonated with me. He first asked me how much am I worth an hour? Uh? What do I do? Divided my annual income by the number of hours in a year? Yeah, he said. Attorneys, CPAs charge by the hour, from the low of $100 to as high as $1000 an hour (sometimes more). My friend then said that if I really wanted to be wealthy, I had to do things that will increase my wealth to my desired level.

So if I wanted to be worth $500 an hour, I had to make sure I spend the majority of my available time pursuing $500 an hour projects. Things like surfing the net, reading my emails are $1 an hour activity – he says. What he meant was that I was wasting my time with these activities.

Here is a list of typical time wasters :

1. Checking emails

2. Watching TV

3. Cleaning your yard

4. Mowing the lawn

In businesses, doing low level jobs is a time waster according to my friend. Things like :

1. paperwork

2. cleaning your own office

3. Essentially, not outsourcing and doing everything yourself.

High Value Activities

1. Continuing Education – essentially, are you keeping up to speed with developments in your industry?

2. Networking – Are you spending enough time with your peers and networking? Most great career opportunities result from networking.

3. Self Improvement – are you spending time making an effort to improvement yourself? be a better manager? be more efficient? be more sociable?

4. Prospecting new clients – This is very relevant to those in sales. Prospecting new clients is a high value activity and blood of future businesses.

I asked myself if I was spending too much time on personal finance?

Don’t get me wrong, getting your personal finance in order is very important. But how much time should you spend on it? Frankly speaking, I don’t think we should spend too much time on it. Here is how I reduce the time I spend on it.

1. Set your budget and monitor by Microsoft Money – It may take a while to monitor your spending and coming up with a budget. But once it is done, monitoring it with either microsoft money or quicken should be a piece of cake.

2. Finding out how how you need to save for retirement and other stuff – How much do you need to save for retirement and your kids college education? How portfolio asset allocation is appropriate for you? What is your risk profile? Well, how long does it take for you to find out? If you surf the internet, you may never figure this out. How can you trust the tools on the internet? My solution, pay for a financial plan or hire a financial adviser. Cost = maybe $250 to $500. If you do not like the plan, worst case is to get a second opinion. All major houses offer free financial plans as part of their investment platforms as well. Time spent = maybe 3 hours filling questionnaires and listening to presentations.

3. Automatic Investing – Once you figure out your asset allocation and how much you need to save, then you should put everything on auto pilot. Set up automatic savings electronically. Invest in a asset allocation platform either through a investment platform at major brokerages or an asset allocation fund. The advantage to is that you get professionals rebalancing your portfolio and making sure you are allocated to all the major markets.

Semi-annual and annual reviews – If you use an adviser, you probably shouldn’t spend more than 2 hours in a year with this.

But how much time are you spending on your personal finance? Is it too much?

Well, I have a feeling many of us (especially pf bloggers spend too much time on this topic simply because we write about it). Here is my breakdown on my time spent on pf stuff.

Write and research blog – six hours a week. I try to do most stuff over the weekend.

Researching finance stuff on the internet – Almost none. I did a lot of it in my younger days but these days, I do not have the time, nor do I want to waste my time doing this. If you have a question, phone your adviser and ask him or her to send you some info! (that’s what I do).

Picking your own funds – Once again, I don’t do that any more. I am invested in a growth portfolio that is automatically rebalanced. If I choose my own funds, I have to keep looking at morningstar and remind myself to rebalance every year.

Doing your own investing or trading – I’ll make a bold statement here. But if you are that good, you should already have your own hedge fund, earn 100 million last year and have a 10 acre estate in Connecticut. You probably would not have time to read this!

Time spend coupon cutting – I’ll admit, Mrs Credit Card does this. But she is a stay at home mom. But if I were alone, I simply do not have time for this. How many hours a week do you spend cutting coupons?

Are you neglecting actually making money?

I know a “high end” financial adviser who only have clients with eight figures in assets to invest. I asked once him how does he get clients like these. This was what he said. He said “Mr Credit Card, I tell my prospects or clients, your job is to make money, my job is to keep it and grow it at an acceptable rate”.

I’ll repeat, he says his job is merely to preserve wealth and grow it at an acceptable rate. This is how the wealthy get wealthy, my friend said. They focus on wealthy creating activities, not $6 an hour jobs and activities that they can outsource.

Fellow PF Bloggers and Readers : Are you spending too much time reading about personal finance or in every minute detail and every aspect about your finances while neglecting to focus on how you are actually going to get wealthy? Are you investing too much time in $6/hr task like stock picking, mutual fund selections? I would appreciate if you share you views here.

4 Responses to “Are You Spending Too Much Time On Personal Finance?”

  1. Millionaire Mommy Next Door Says:

    Great questions. Personally, I spent a couple of years, in my early 30′s, learning about personal finance. I read, a lot. I asked questions. I experimented. And I did most of it myself.

    Today I choose to do just the parts that interest me (read, web surf, offer advice). I automate most of my day-to-day finances (MS Money software with auto bank downloads, auto bill payments, etc). And I hire people to do the rest (data entry, filing, tracking expenses, tax forms and returns, etc).

    I make the most money now through investing, so I remind myself to make that my #1 priority. But I’ve automated my investing in such a way that even this activity takes me minimal time (about 2 hours a month).
    ~Millionaire Mommy Next Door

  2. story Says:

    This is a great question and one I have been thinking about lately. There are frugal things I do for reasons other than money (like making my own non-toxic cleaners and hanging some of my laundry), but there are also things I do just for the money that pay less than $5 an hour.

    Also, I spend a lot of time mindlessly reading a lot of money saving tip websites, hoping to find maybe one or two new tips. When I consider how much time I spend rooting out that $5 tip, even if it takes almost no time to actually enact, it’s still a pretty big time waster.

  3. thinkliketherich Says:

    good comments, i spend alot of time reading and educating myself. good suggestions with the auto rebalancer portfolio, i have been meaning to explore that, i’m also very interested in learning about microsoft money, but again havnt gotten to it yet.

  4. Linda Logan Says:

    Yes, I do spend a lot of time on Personal Finance. By the time I watch the half-hour Nightly Business Report (PBS) every day, plus read the Investor’s Business Daily newspaper, check my investment-related Google Alerts, read Money, Smart Money, and Kiplinger’s magazines, research stocks, mutual funds, and ETF’s, monitor my portfolio, do my own trading, and organize all paperwork, I probably spend 2-3 hrs or more a day on it. It’s my hobby and my passion and I love it. And the rewards have been great.

    I spent about 15 years in the work force after the kids were older and then retired 7 years ago at age 52. My husband has been semi-retired for the last 6 years, since he was 54. Neither of us have college degrees, nor have we ever had big incomes. We’ve paid for our own health insurance for the last 12 years. We’ve never had the opportunity, convenience, and tax benefits of being able to save in a 401k because our employers never offered one. And if your retirement choices are limited to an IRA or a ROTH with their very low contribution limits, you’ve got to push it to get the best return possible. And I don’t trust a financial advisor to be as concerned about our comfortable retirement as I am. But I’m a gifted saver and have taught myself to be a successful investor.

    The time spent on our Personal Finances is now paying off in free-time for both of us. Plus, it’s much more fun than golf.

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