Finances: Try, But Not Too Hard

Inflation was biting, and Chaim Steinmetz had become hyper-focused on money. He crash-coursed a couple of books and grimly got to work. As the gurus advised, he started a side hustle to increase his income and began weekly budget reviews for the family; the extra dollars that he was now squeezing out were headed into a couple of IRAs and 529 accounts he’d opened. In the evenings, he was poring over stock charts and tax manuals to maximize his fledgling investments and finances.

It was exhausting, and his family was fuming, but what choice did he have?

A Balancing Act

Taking responsibility and doing serious hishtadlus to earn money and budget properly is obviously an important adult obligation. But as with many other things in life, it’s easy to take things too far, which can actually undermine long-term financial success. As with dieting, the best financial plan is one that is balanced and sustainable. With proper thought and processes, many people can improve their finances without going crazy. And a balanced approach is likely more hashkafically sound too.

Limits to Sweating for Dough

Take earning, for example. Since Adam Harishon’s time, humans have needed to sweat for their dough. But that doesn’t mean we need to maximize the curse (See Mesillas Yesharim 21). In a numerical sense as well, most people are better off trying to improve within their current career and/or business versus distracting themselves with an entirely different hustle. Usually, we need one good path to parnassah, not two or three. Still, some careers paths or businesses really do cap out, so striking new, additional income paths does have its place.

A Bit of Budgeting that Goes a Long Way

When it comes to budgeting and saving, unless one is particularly good at it and/or enjoys the process, living with every single penny accounted for is exhausting. Similarly, pressuring a spouse and kids to cut down on things that are important to them may sometimes be necessary, but on the other hand, it may be counterproductive. Most often, family budgets are not massively off, and by making a few changes that can be applied consistently, significant dollars can be saved and budgets balanced.

It’s worth considering the size of the benefit of a particular budgeting decision. The selection of housing, for example, will have a much greater impact in the long run then constantly obsessing over smaller items on the family’s expenditure list. Some may prefer to live in a more modest home, potentially saving many thousands of dollars annually, versus skimping on food and clothing. The decision to downgrade cars may yield substantial savings without having to think about it beyond the initial decision. Even deciding to stick to a supermarket that overall has better pricing can improve a budget substantially based on a one-time decision.

Investment Obsessions

Before one has accumulated significant assets, especially if they are busy with their career and profession, spending large amounts of time researching stocks or unique investment ideas is often not worthwhile. Most amateurs will find that getting creative may help them hit a home run here and there, but they’ll probably also make some big mistakes. This approach usually leaves them worse off versus tried-and-tested approaches. Additionally, researching and monitoring complex investments requires expending a significant amount of time and energy, which isn’t realistic for those who aren’t professionals themselves or can’t afford to pay for due-diligence professionals.

On the other hand, you can get most of the benefits of investment programs by selecting good mutual funds, which historically have done very well without requiring ongoing oversight. Another solid option for regular folks is buying and renting out a house if they are up to it and have money for a down payment. Take the time to develop a good mutual fund and residential real estate portfolio. Beyond that, it is often overkill for those without large asset bases.

Tax Trick Limitations

There are myriad ways to lower tax bills. It’s worthwhile to get to know tax basics and keep an eye out for tips. But obsessing over tax minutiae often leads people to paralysis analysis or worse. You can ponder endlessly about the exact way to optimize between traditional IRAs, Roth IRAs, 401(k)s, self-directed pensions, 529 plans, real estate depreciation, life insurance deferrals, trusts, etc. There’s usually no one correct approach, and often, you can get 95% of the benefit with 5% of the time and effort. Unless your tax bill is significant, pursuing that little bit of extra efficiency is probably not worthwhile.

Get Some Help; Then Get Back to Work

It’s worthwhile to take the time to find an accountant who is skilled and attentive and can help you put in place a good tax plan. Updating this plan shouldn’t take more than a couple of hours a year for most people. Those who have significant businesses or investments should spend more time, but even in such cases, some become obsessed and harm their businesses and investments with contortions that kick the tax can down the road. The worst example in this category is taking risky tax positions that can lead to serious penalties or even criminal complaints. Not worth it.

Not an Excuse for Laziness

I’m absolutely not encouraging taking a thoughtless, lackadaisical approach to pursuing financial stability and growth. To the contrary, I encourage being thoughtful and efficient in how you allocate your limited time and focus. There is a natural tendency to seek out the complicated instead of recognizing that pounding away at the basics is usually the key. Going through contortions for chance opportunities seems like unnecessary hishtadlus, which by definition does not improve your circumstances.

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