You would think that people who become millionaires try to save every dime. After all, one of the surest ways to become wealthy is to invest a portion of your income and save where you can to do so. One of the interesting insights given in The Millionaire Next Door and The Millionaire Mind, however, is that many people who become millionaires don’t do a lot of work around the home themselves, even while they are becoming millionaires. They don’t replace the hot water heater, change the oil in their cars, or recarpet the living room. Instead they hire the work out.
The philosophy is that they spend their time doing what they are good at, so that they can increase their income and increase their level of skill, and leave other things for people who are skilled at those things. Instead of sending a day replacing a belt on their car, they spend an extra day at work on Saturday, getting more done than they can during the normal week. Instead of laying linoleum over a few weekends, they hire a flooring company and then spend quality time with their families and some time doing strategic planning for their business. They know that a professional can do the job faster and (usually) better than they can, and that while the boss won’t care if they do a great job building a deck onto their house, he will care if they do a great job on a report or an important presentation. Think about it: Who would you promote – the guy who leaves at noon on Fridays to go home and do some home project or the guy who comes in over the weekend to get more done?
Does this mean the path to financial success is to just hire everything out? Well, not exactly. Often sweat equity is a lot easier to come by than cash, especially when you’re just getting started in the business world, so you need to do things yourself. Also, just because people who are becoming wealthy may hire things out to get more done doesn’t mean that you can hire everything out just so that you can watch a Breaking Bad marathon all weekend. When considering whether to hire things out or do them yourself, consider the following:
1. Do you have the ability to make more money by working more hours?
Hiring things out to increase your income only works if you have the ability to make more money, or at least advance in your career faster, if you work more. If you are a wage laborer who gets overtime for working extra hours, it might make sense to spend an extra 10 hours at work instead of putting in 8 hours doing some plumbing at your home. For example, let’s say you are an hourly worker and make $20 per hour of overtime (after taxes) and it costs $180 to hire a plumber to do a job that would take you 10 hours to do. You would make $200 by working extra, plus get noticed as a person who is willing to put in extra time, and only spend $180 for the plumber, for a net gain of $20, if you were to hire the job out. (Note that it doesn’t matter if it only takes the plumber 2 hours to do the job because he has the right tools and the experience – it is how long it would take you to do the job.)
Conversely, if you work on salary and get the same amount regardless of the amount of time you put in, it would be better financially to do the job yourself since you’d still make the same salary even though you worked the extra hours and still need to pay to have the work done. Still, if you are able to learn skills, make connections, and improve your reputation at work by putting in extra hours, such that you may make more in the future, it may still pay to hire out the work even if your salary is fixed.
2. If you run a business, are there useful things that you can do to grow the business by spending more time?
Obviously, more work may not mean more income for small business owners, at least initially. However, while you may not take home more money immediately by hiring out work around your home, if you can do things that make your business grow and expand, such that you’ll make more money in the future, it may make sense to hire jobs out. Note that things like doing some strategic planning or figuring out marketing strategies that will bring in more money are worthy activities, while doing busywork or sitting in the office playing solitaire are not.
3. Is the service provided worth the cost?
Many services are well worth the cost since it would easily cost you at least as much in time and aggravation of you do the tasks yourself. Others are overpriced or just not worth doing at all. It is OK to spend some money on luxuries, but don’t pretend that you are really helping your financial situation by using them.
4. If you’re hiring out to spend time with your family, is it quality time or just an excuse for “me time?”
Hiring out services isn’t all about finances. Sometimes it means spending a weekend with your kids instead of spending it by yourself cursing as you hang dry wall. But if you are hiring things out so that you can spend more time on the golf course, maybe you’re just being a little lazy.
5. Is the job really just a hobby for you?
Some people do things like home renovations or work on cars because they enjoy doing them. In that case, while it might not be worth your time to build that deck, doing it is its own reward. Just make sure that your hobbies don’t get in the way of your primary responsibilities as an employee, spouse, and parent.
6. Do you trust others to do an adequate job?
Sometimes you have no choice but the do the job yourself because others won’t do it well. It might be impossible to find a place that will be able to change the oil in your car without stripping the plug, so you do the job yourself. Unfortunately, often it is difficult to find “professionals” who will do a job well, and it is almost impossible to find people who will care as much as you. If you find them, hold onto them and be sure to give them all the work you can to keep them in business.
What do you think? What jobs do you do yourself, and what do you leave for the professionals? Let me know! Please send me an email at firstname.lastname@example.org or leave a comment.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.