Money Frugal, but Time Wise

Generally, I like to consider myself frugal, even take a bit of pride when I get a good deal.  That said, I am sure others can show me up in the art of frugality.  One thing though, that gets missed in the process of being a frugal master, is the cost of time.

It is absolutely true, that you need to spend less than you earn, in order to grow your wealth.  This is something that my wife and I have focused on for the last 17 years.  You will have no opportunity to become financially independent if you can not learn to live within the budget constraints of your cash flow.

So should you do everything yourself?  Become a master do-it-yourselfer and never need to spend money on the labor of others.  Sounds good, but I would argue that you are very much being “money foolish and time waster”.  Impressed with the pun?  Hey, I am not a professional writer, so a little credit for trying would be appreciated.

The point I am trying to make is time is a valuable commodity.  You cannot get time back, but you could, in theory, earn your money back.  No, I am not talking about the fleeting nature of time and missing out on the joy of living.  Yes, that is important, but I am talking about the possibility of you being able to earn more with the time you waste on doing everything yourself.

Let me give you a real-life example:

Part of my investment strategy is single-family rentals.  I purchased my first rental about ten years ago and managed them myself with a little (or a lot) of help from my wife.  This included the pleasure of renovation, upkeep, turning units, marketing, screening tenants, negotiating leases, and the really fun part.  The fun part is the friendly call from an upset tenant, late on a Friday night, telling you the AC isn’t working and they are really hot.  Of course, you ask “when did the AC start acting up” and have the pleasure of finding out it started on Tuesday of last week.  Now you get the privilege of paying extra for a weekend service call.  People like to say rental properties are “passive income”.  That might be true for income tax purposes, but not remotely true from a practical standpoint.  My philosophy though was to be frugal.  Why give away 8% of my gross revenue, when I could do the job myself!

That thinking did save me $2,000 a year, but also limited me to an only managing two rental properties.  Between my fulltime job, a family, and other commitments, my wife and I could only handle two rentals.  The thought of buying another rental seem impossible to handle, until a few years ago.

On a family trip a few summers ago, I read a book called “The 4-Hour Work Week” by Tim Ferris.  This book completely changed my mindset about how I used my time.  Now I will save my book review for some future post, but let’s discuss the important concept (actually concepts, but we will stick to just one for today) I took from this book.  Your time is a limited commodity, you should be using it wisely.  It might very well be in your financial interest to let someone manage that task, so you can focus on making more money elsewhere.

In my case, even before I got home from our trip, I turned over all of my rental properties to a professional property manager.  While this decision cost me 8% of my gross revenue, it freed me up to buy additional rentals, that I otherwise would never have had the time to manage myself.  This took my gross rental income from $24,000 annually to $140,000 annually, as of today.  My resulting net cash flow has now tripled and that doesn’t include the amortization on my mortgages.  This decision, not only improved the quality of my life (significantly) but accelerated my path to financial independence.

I would never have had the time or desire to look for new rental properties, without understanding what was the best use of my time.  As a side note to this decision, the property manager was able to increase the rental rate on all my units and basically paid for themselves.  So you could say I wasn’t as good of a manager as I thought I was, but I like to think I just made a really good decision!

Now if you enjoy opening the toolbox and fixing everything yourself, I don’t want to take that pleasure away from you.  There is a difference between doing something for enjoyment versus something to just generate an income.  Hopefully, you will take from this article that you might be able to use your time in a financially better way.

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