Rich folks have a few extra considerations with regard to storing cash. Middle income households might consider $3500 to be a sizable amount of money. That might represent a month’s rent, or even most of a vehicle! But for a retired family with $15M, $3500 is probably closer to three days of conservative spending, on average. Generally, even a financially independent household should keep one to three months of cash on hand,1 and throw in savings for next year’s tuition, or a high end home renovation, and a wealthy family can easily blow through FDIC limits.2 Given Silicon Valley Bank’s recent collapse, worrying about whether my bank is going to give me my cash back when I need it is the last thing I have space for in my brain. What can we do to solve this problem once and for all?

1. Keep a checking account. This works great, as long as I stay under FDIC limits. It’s hard to live without a checking account, so I’ll want at least a bit of money here.

2. Play games with FDIC limits. I can put $250K away for myself. Then, I can put $250K away for my spouse. Then, I can put $250K away in a joint account for myself and my spouse. Then, I can open accounts in other categories or at other institutions, and juggle money between these accounts. That’s a hard no. Who has time for that?! So this eliminates most CDs, checking, and savings accounts.

3. Use an institution that will play games with FDIC limits on my behalf. Some banks will, behind the scenes, go open all those accounts for me. Unfortunately, they often still only pay 0.5% or whatever on the checking accounts, and the savings accounts at these institutions aren’t much better.3 Look. I don’t mind paying for service. But I also don’t enjoy giving money away to giant banks. So I’ll pass. No thanks!

4. Use a money market fund. OK, now we are starting to relax the absolute guarantees against losses that FDIC insurance provides. But we’re rich, so we can afford a little risk, right? In 2008, a single money market in the entire country “broke the buck” and failed to immediately pay all the money back to the depositors. That’s not that much risk for only a few months of expenses, considering the vast history of money market funds. On the other hand, a random search for “money market rates” turned up “Top 10” listicles with accounts paying 4%. 4% at the time of this writing is highway robbery! Again, this isn’t about the money, this is about not making donations to large financial institutions as a matter of principle.

5. Fortunately, there exists a financial product that receives just as strong a guarantee as FDIC insurance, has no cap on the amount you can store in it, and has never seized up or stopped trading except when all markets are stopped everywhere: ultra short term USA federal Treasury bonds, aka T-Bills.
   
   T-bills always pay very close to the highest risk free rate available. They have the full faith and credit of the USA and the world’s most powerful military alliance behind them, and they’ve never failed to pay the interest they owe. And while they require you to lock up your money for a few weeks, the Fed considers it one of its three core missions to ensure that the Treasury market remains liquid and deep, so you can always sell a T-Bill for very close to what you paid for it, plus some interest. Even better, T-Bill interest is exempt from state income tax!4
   
   Unfortunately, there’s one downside. Annoyingly, T-Bills require constant “rolling,” which means that when it matures, aka gets paid back, you have to go out and buy another T-Bill! Some banks will do this for you, but there’s a secret trick to get this feature in any brokerage account, which brings us to…

6. Ultra short term Treasury ETFs do all that rolling for you, and while they do take a small fee to do so, at a good issuer that represents a tiny amount, about 1/100th of the interest that T-Bills currently pay as of this writing. Even better, ETFs from issuers that are probably “too big to fail” are available in every brokerage account. This is where the Solving Wealth family stores excess cash. I can always get money in my checking account within a couple days notice, and use my credit cards or credit line to cover things in the meantime.
   
   Looking back at the history of these ETFs, their value did decline once, for one day. In the middle of the Fed’s recent rate hikes, which were the most aggressive rate hikes in the history of the Fed, the value of the ETF we used declined down to 99 cents on the dollar for a single day before recovering the next day.5 That’s a level of risk that I find acceptable, but you do you.
   
   If you are feeling lucky, you can move from ultra short term Treasuries to merely short term Treasuries. Probably you’ll make a little extra interest! But I don’t keep much cash around, so I’ve not bothered.

7. There’s another option that’s appeared on the scene recently! A new ETF uses a combination of carefully purchased options or futures on the S&P500 to simulate the return of T-bills. Even better, the issuers of this ETF are of the opinion that instead of earning interest, you earn capital gains!6 While the S&P500, which represents the 500 largest stocks in the USA,7 is probably the second most liquid and deep market in the world, futures markets are esoteric and have all sorts of weird behaviors, and a futures market is always less liquid than the underlying market. For example, if you can’t explain what a “gamma squeeze” is, then you don’t understand how these funds work.8
   
   I don’t keep much cash, so I’m not interested in all this extra complexity for a slightly better tax treatment. You might disagree!

8. Every option so far has concentrated on numbers in a USA account. However, there are more exotic ways to store value. Actual physical cash is always an option, although that requires worrying about theft, fire, etc. Foreign banks will store dollars, euros, and other currencies. Stablecoins will let you store unlimited amounts of dollars on the Ethereum blockchain, and walk around with them literally in your head by memorizing 24 words, or you can keep them on a USB stick. Personally, I’m not into making myself a kidnapping target, so that’s a hardcore “No” for me, beyond a few bucks of spending money I keep on my money clip when I remember to hit the ATM. As to physical cash, I just don’t use much any more! It’s too inconvenient.

For the rich, cash shouldn’t represent more than a tiny fraction of your net worth, so getting worked up about 4% vs 5% interest is definitely not worth your valuable time.9 Still, people ask, so it’s good to have answers. When your friends ask you, now you will have great answers for them, at least until the next time the financial landscape changes!

Some of you may be annoyed that I didn’t recommend actual symbols that you can look up in your brokerage account for the T-Bill ETFs. However, I’d like to point out that I’m a random person on the internet with no professional qualifications, and that recommending investments is a licensed activity, even though getting one of those licenses doesn’t require you to keep the best interest of your clients at heart.10 It would probably be fine for me to list the symbols, but I don’t like hassles, so I’m going to play it safe this time. Google for “ultra short term treasury ETFs” and you’ll find some nice options to choose from. Look at the expense ratios, the average duration, the “SEC 30 day yield”, which is close to the amount of interest it paid over the last 30 days, the price history, which you should compare to what the Fed was doing at the time, and you can pick one, and then never have to think about this ever again.

On a forum I’m on, a person recently wrote in to ask about how to deal with the problem of healthcare for a person who is choosing to step away from employer coverage prior to 65. Fortunately, there's good news here! Prior to medicare, the vast majority of people who take care of themselves don't need much medical coverage, because 1% of the healthcare/public health $s provides about 99% of the benefit.1 For the vast majority of folks under 65 in good shape, the primary worry is not chronic health conditions, but catastrophic care.

Therefore, first and foremost, once you are no longer eligible for workplace coverage, exercise is your new first job!2 Optimal levels of exercise appear to be in the range of 14-20 hours per week. That said, the improvement from large scale, long term studies for people who exercise that much vs. people who exercise closer to 5-7 hours, while significant, isn’t as large.3 If you are not an exerciser today, start at a couple 25 minute sessions weekly and increase both intensity and duration until you hit your goal. If you are in a position to voluntarily give up medical coverage through work, you have 5 hours a week, and don't accept any excuse your brain comes up with! Included in that time, you should include at least 2 weight lifting sessions as well that hit every major muscle group, although 4 may closer to optimal.4 With weight lifting, don't aim for it to be hard. You should feel like with every set that you could have done another 3-5 reps, and with every session that you could have gone another few 10s of minutes. It shouldn't be easy, but it shouldn’t be difficult either. (For clinical references on this topic, I suggest the Barbell Medicine podcast and website. They do a great job of citing their clinical opinions and staying up on the latest significant research findings.)

Next, sleep: get 6-9 hours per night, and aim to go to bed early enough such that you don't need an alarm to wake up. Dark, cold, and quiet sleep areas are your watchwords here, as well as avoiding any psychoactive substances (caffeine, alcohol, etc.) late enough in the day to be still active in your system when you sleep. Alcohol will knock you out, but any good smartwatch will tell you that you get crappy sleep if you drink within a few hours of bedtime. (I know. Sometimes ignorance is bliss! I basically don’t drink at night any more!)

Next, diet: avoid sugar and booze, limit saturated fat, and aim to eat from the outside of the grocery store. If you avoid sources of concentrated sugar (including fruit juice, fruit concentrate, etc.), eat lean protein sources, and exercise like above, you will probably be doing about the best you can regarding diet. Yes, you may get a small boost to heart health by avoiding red meat vs. white meat5, but who cares? We're aiming for big optimizations here. Also avoid exposure to smoke, chemicals, etc. You don't have to go crazy here, but you will need to ensure they aren't a regular part of your life, and for the addictive versions of these, that probably means zero indulgence for most people.

Last, loneliness: humans are tribal monkeys. Find your tribe of people you can relax and trust and let your guard down around. Relax and let your guard down a few times a week! If you have toxic people in your life, life's too short. Cut them out! Move if you have to.

Now, how to fund the remaining healthcare needs prior to 65? Options are:

1. Obamacare: get HSA coverage and MAX OUT that HSA every year. Invest the HSA in low cost stock market index funds, and build up a nice nest egg against catastrophic care (car/hiking/bike accident, etc.). This HSA can also pay for your end of life care if you get dementia at a normal age. Our HSA is up to six figures by following this approach. We plan to have enough to fund round the clock care for five years for both me and Mrs. Solving Wealth by RNs, plus daily MD visits. I figure that will run a few million $s, but thanks to the miracle of compound growth over many many decades, I should be fine when I need it, and I can always supplement from my general portfolio. I save my receipts such that if my HSA gets too big, I can start reimbursing myself for long ago expenses. Get a plan that minimizes maximum expenses, although beware, because the out of pocket max is not the out of pocket max (significant edge cases apply) because everything about healthcare in the USA is terrible except the outcomes. Plan to pay out of pocket for everything except covered catastrophic care, and never reimburse yourself from your HSA, until it's grown to that millions of $s stage.

2. Health Sharing ministries: These still have lifetime maxes and also require you to swear "lifestyle" statements, which if later proven false can be used to deny coverage. But they are way cheaper than Obamacare, because they are generally way worse in terms of coverage. Still, they can be better than nothing. I don't like them because I'm building a healthcare plan that minimizes my chance of getting chronic diseases before medicare coverage starts, which means my main worry is a multi-million dollar accident involving months in an ICU, and that lifetime maximum is a killer here. Literally!

3. Medical tourism. Costa Rica is close, cheap, and GREAT care is available, reportedly. Mexico is close, cheap, and GREAT care is available, reportedly. I’ve heard that in India, a person can wander down to the local chemist (that’s what they call pharmacist) and get the same medication that you get here for 85% off the sticker price, or even larger discounts, with no prescription, and can come from the same factory that Walgreens gets it from! Reportedly. A little bird told me this. I have no idea if this is legal in the general case, or legal for you. You should consult a lawyer. However, if a lawyer were to advise you on a strategy that you could pursue, then the cost of a ticket and five star lodging in India is cheaper than the out of pocket cost for many medicines! I also have a former colleague who suggested that a luxury trip to South Korea could get you a 5-star executive annual checkup with full blood work, MRIs, etc. for a couple thousand $s.6

4. Pay out of pocket. They are rare, but my primary care physician doesn't take insurance, and takes cash or check. He charges by the hour, and passes on costs for vaccinations, blood tests, EKGs, etc. I spend a few hundred $s per person per year with him. Hospitals will often pre-negotiate rates at their “concierge desk” or through their normal billing department for prepaying certain surgeries and procedures, and these rates are sometimes lower than insurance copays!

OK, now what about the most common things in the remaining long tail?

1. For birth/maternal care, check out birth tourism, or just pre-negotiate with the "concierge desk" at your local hospital. If your local hospital doesn't have a concierge desk, find one that does!

2. Hysterectomies are super common, and about 600K are performed every year in the USA alone! Again, check out medical tourism, or work with the concierge desk.

3. For diabetes care, revisit the above about exercise and diet, and find a doctor who can work with you on this topic, which can help lower insulin expenses, etc. You may find that regular trips to somewhere cheap to purchase expendables and flying them back in a cooler is cheaper than buying locally, although reportedly Walmart has some exclusive deals on certain kinds of injections for certain subsets of diabetes cases that are super cheap.

4. For trauma, cross your fingers, hope to God, and hire a medical advocate and an attorney ASAP. If you are well enough to travel, consider medical tourism. Be prepared to play hardball with asset protection strategies, and treat the collection offices at your medical providers like the scum they are, somewhere below used car sales-droids and payday lenders in terms of ethics. Lawyer up HARD.

   (Remember, your doctors and nurses are just as frustrated by that side of the business as you are, so don't take it out on them. They are as helpless as you are.)

   In the USA, we are used to fixed prices. Medical bills after a procedure here are always, always, always a suggestion and an opening negotiation, and can often be settled for 10-20 cents on the dollar. In extreme cases, people have been able to settle for under 3%, or get out of paying entirely legally! (This can have an impact on your credit score, but I’m down for a bad score for 7 years in exchange for a couple hundred $K!) And given the terrible tactics, lies, and greed that runs through our medical system, you should feel rightous about fighting every medical bill from a large faceless provider tooth and nail.

   Of course, your small practice down the street is entirely another story. When you hit the call center when you try to call about your bill and you get that slimy feeling from the person on the other side of the phone, you’ll know which kind of provider you are dealing with.

Every country is deeply broken and totally insane several unique ways. The inhabitants look at you funny when you ask them about it, because they can’t conceive of life any other way!7 Folks from the USA know our healthcare system is broken, but if any specific changes are suggested, it’s likely to ignite a full on tribal war of red vs. blue. So I’m not going to suggest any changes here.

The good news is that there are simple practical steps that a rich or upper middle class person can take to avoid the worst parts of the USA’s healthcare system, even if it’s just up and leaving the country occasionally!

$7M will buy you a really nice beach home on Martha’s Vineyard, and at least this week, while 90+ degree temperatures3 are sweeping much of the nation, I’m enjoying sunny days with a light breeze and highs in the mid 70s.4 I’m not big into heat, so this is super attractive to me! If I had my own place here, I could customize it how I want, come visit any time it was too hot at home, etc. On the other hand, I have a bunch of projects going on right now. Is it worth my time? Is it going to stress me out to afford this place? Let’s do some math!

Under normal circumstances, different parts of your home will last different amounts of time, but you will generally end up putting enough money into maintenance to rebuild it from scratch every 30 years or so. However, the salt air corrodes everything, the nor'easters blast your roof and your landscaping, and flooding is increasingly a thing on those desirable beachfront lots. So let’s use 20 years instead.

It’s hard to separate the cost of the lot from the cost of the house, but I’m guessing that a $7M beachfront home is probably $2M of lot and another $5M of house, so let’s use that. That works out to $20,833/month of maintenance, on average. SERIOUSLY?! Wow. OK. Well, what about insurance, taxes, and utilities? My real estate app estimates $1,039/month for tax, and another $1,822 for insurance. I’m guessing it’ll probably run another $500/month for utilities, since I won’t be there that often and I’ll probably put in solar. So that covers electric, water, sewer, trash, landscaping/plowing, and we’ll skip the gas/oil since I’ll put in low temp heat pumps.

My principal and interest would be $37,106 at current rates with 20% down, apparently.5 According to FireCalc, starting with $5.6M in a 100% stock portfolio and withdrawing $37,106 monthly for 30 years results in a wildly negative balance on average, so I’ll pay $7M cash instead of taking out a loan. I can always refinance later if rates get low enough. That means I just have to make up for the money I failed to make in the stock market, which works out to about $32K/month. On the other hand, the house will probably make about that in appreciation, so we’ll call it a wash and not worry about opportunity cost.

So all in, my house costs me about $24K out the door each month, and then we need to throw another few K in for a property manager. Call it $27K with a good one. Ouch!6

You know that friend who bought a brand new car, and always parks it diagonally across two lanes at the back of the lot, and freaks out about whether your shoes are completely dry and free of sand before you get in the vehicle? And then when they inevitably got a tiny little ding the in parking lot of the grocery store, they wouldn’t shut up about it for a month? Yeah, they bought too much car.

In theory, you might be able to afford the thing, but do you want to? $27K/month buys an awful lot of international business class tickets. It will buy a short private jet flight every month. It will buy a week every month at some of the most expensive hotels on Earth. It buys art, mansion rental, boat charters, and a really nice vehicle several times a year!

So, yes, you can afford it, but do you want to? If you keep your personal-use real estate to under 10% of your net worth, that leaves plenty of other money to support a great lifestyle. If you keep it under 15%, then you’ll probably have a good time. Since I don’t have $70M7 yet, I think I’ll hold off on the house on Martha’s Vineyard.

A happy life is going to be full of things you are happy to replace, and full of people you aren’t. Don’t stretch to buy things, and you won’t stress about owning them.

Take the home real estate market. Until 2009, the expression “safe as houses” lacked any hint of irony. Or take the recent SVB (Silicon Valley Bank) mini-crisis. SVB went bankrupt by investing in “risk free assets,” US Federal Treasuries. Losing money on those is supposed to be literally impossible!1 Venturing farther into esoteric markets, in cryptocurrency, crashes have happened repeatedly when investorsgamblers use automated markets to post collateral and borrow more crypto, which they post as collateral and borrow still yet more crypto. All of these examples have a single thing in common: debt.

In the early 2000s, people started taking out NINJA loans (no income, no job, accepted!) to buy real estate. They loaded up on interest only loans. But worse than that, they moved from traditional 20% down loans to 10%, then 3%, then 0%, and in some exotic cases, loans where the borrower received a check at closing! What’s the worst that could happen? The bank figured they could always foreclose, sell the house for a profit, and screw over the borrower. After all, home prices always go up, and never go down. They especially never go down in hot markets, and they especially never go down in all the hot markets simultaneously across the entire country. I think we know how that ended up.

Over a decade later, Silicon Valley Bank took their depositor’s money, turned around, and invested it into long term US government bonds. Those long bonds paid a higher rate than short term bonds, and yes, long bonds could theoretically lose value if the Fed raised rates, but the Fed would have to raise rates suddenly and enormously for SVB to go bankrupt. Yes, they had borrowed a ton of money from their depositors, but rates had literally never risen that fast and that much in the entire history of the USA! It was impossible to lose money! Well, impossible right up until the moment when it happened.

So what’s the lesson here? Debt is dangerous, even if it isn’t yours. In the Great Financial Crisis of 2009, it didn’t matter whether your home was free and clear, or had a nice, responsible 20% down mortgage, or you bought it with a crazy cash out NINJA loan. The neighbors were all busy gorging themselves on insane levels of debt, and when the market crahed, all the home values cratered together. The SVB depositors got bailed out by the FDIC, the Fed created a “special facility” to prevent the panic from spreading, and we’re all paying for it through fees at our banks and slightly higher inflation. The Bitcoin investors in 20182 who bought and held still lost value on their coin, even if it came back a few years later.

The fact that there was short term money to be made with irreponsible debt, at scale, was the thing that caused the crash! Home values would never have crashed if that debt never happened. In the case of SVB, it wasn’t big enough to move interest rates up all by itself. But the same conditions that made it seem like a great idea to borrow all the money from depositors and dump it in long bonds also caused the Fed to spike interest rates.

So ask yourself; which of your investments are levered up? What is your debt load? What would you do if you had a cash flow crunch? How would you make your payments? This is a normal level of prudence.

What investors fail to do, over and over and over again, however, is ask these questions about the entire market, thus making debt dangerous. So now I want you to go back and ask yourself a different question. Which of your investments are in things where the levels of debt across the market are high and rising? Which of your co-investors or counterparties (the people/entities who owe you money) are going crazy with debt?

Debt causes crashes. Look under the hood of any market bubble,3 and you’ll find people borrowing like there’s no tomorrow. Look under the hood of any bubble popping, and you’ll find that debt going bad. Any investment can be risky if enough debt is involved.

As rich people, we basically are immune to financial problems, as long as we stay rich! You know what’s better than making a ton of money and then losing it all in a hot market? Making way less money and not losing it all! Any investment, no matter how “safe,” can be made absurdly risky with enough debt.

On the other hand, the “right”4 thing to do if you know market is in a bubble might be… nothing. Alan Greenspan correctly called the tech bubble in 1999 in a speech broadcast to the world. Of course, stock market investors who got out in 1999 missed the crash, but they also missed out on all the gains between 1999 and 2001, and the gains were larger than the crash! The “right” thing to do was not just nothing, it was to keep buying!

For veteran cryptocurrency investors, the mania and hype that preceed any crash are so predictable at this point that people make roller coaster memes about it. And the “best” way to make money in that market historically has been to do as little trading as possible on the very best coins, with no leverage, and hold for as many years as possible. People who ignore the booms and also ignore the busts generally outperform the people who try to time the market, in almost every market!5

So what do we do? Ignore rising debt levels, or trade on them? The answer, as usual, is nuanced. It won’t hurt to be aware when a market is in a mania. Don’t get caught up in the mania, and you’ll avoid the FOMO (fear of missing out) that might cause you to panic buy. You’ll feel smug and justified when the market crashes later, and that feeling will help prevent you from panic selling during the low times. At the same time, having an understanding of the broader levels of debt in a market will help you identify things that might just be completely mispriced, and that will help you find deals and avoid disasters. Stay rich, friends.

The universe is biased towards the rich. Setting aside any sort of policy environment,1 rational wealthy folks will, over time, tend to accumulate wealth faster than equally rational poor or middle class folks. Why? In a word, risk.

If you’ve ever set up an investment account in the USA, you had to fill out some form of questionnaire in which your bankers were required to ask you how much risk you were willing to take on. This survey is pretty silly, if you think about it. It’s like asking what mph2 you drive. An experienced driver would respond, “Uh, are you asking for an average? Am I driving a dirt track through the woods, or on a straight and level track in a high end car trying to set a personal speed record?”

But no, we’re expected to rate ourselves from “conservative” to “speculative” as if risk was a one-dimensional scale with an extremely limited number of choices. To a real investor, risk is a nuanced and rich topic. If you ask me about my risk appetite, I’m going to respond, “Uh, what kind of risk? Volatility? Wipeout risk? Over what time horizon? Measured against what benchmark? What are the goals we are trying to achieve? How attached are we to hitting them, vs. settling for the backup goals? What are the backup goals?” It’s hard to fit all of that thinking into a silly little survey, so I always just answer “speculative.”34

Kind of by definition, a rich person5 has all their needs met and then some, while a poor person lives on the edge. Therefore, a rich person should always be ready to cut back on their spending,6 while a poor person will suffer some nasty real world consequence if they do so. If an investment offers wild fluctuations over the short run, but a ton of growth over the long run, the rational rich person can choose it, and the rational poor person should not.

This would all be academic, except that there are people who sit around all day and figure out ways to make money by arbitraging risk vs. long term growth.7 Therefore, unless you notice something before everyone else, an investment is either going to be highly volatile and high growth, or low volatility and low growth. A checking account won’t pay much interest, but the dollars you put into it today will be the same number of dollars you can pull out tomorrow, barring some extremely unusual edge cases.

The stock market will randomly lose 25% in less than a month, or 80% in under a decade, but it has always come back. On the other hand, a low cost, whole world stock market index fund is also close to the least risky thing you can buy for any money you don’t need for 30 years, because while it might bounce around along the way as the talking heads on various media whip people into panic buying or panic selling, it’s going to get you growth that beats inflation consistently by a large margin in the long run.

The richer you are, the more volatility you can afford. After all, if you have to go a few years taking slightly lower end vacations but it sets you up for massive returns in the long run, great! But if you have to go a month without eating, well…

So the poor hold cash, food, and other predictable assets. The middle class start buying some precious metals, bonds, and real estate, and then stock market index funds as they get richer. The rich have all of those, but can also afford to buy or build a business, take a flyer on a single stock, invest in startups, cryptocurrencies, on top of whatever the latest thing is that might 1000x your money, or might lose it all.

As an example, an angel investor probably needs to put a minimum of $50K into each company, on average. However, at the earliest stages, only 1% of startups might go up 1000x.8 So the rich person who carefully invests $15M using talent and judgment across hundreds of startups might see returns of $150M or more over the next couple decades, while that poor person can’t even scrape together enough to make a single investment, and if a middle class investor is foolish enough to put $50K into a few startups, they are overwhelmingly likely to just lose it all.

Because rich folk can afford risk, rich folk reap rewards. This is why it’s vital to have a high savings rate. Unless you power through the earliest phases of your financial journey by paying off debt, building an emergency fund,9 you will never make it to being able to afford the stock market, any significant amount of cryptocurrency, or businesses.

Similarly, that’s why, if you aspire to become richer than you are, you must also educate yourself about investing at the next level. The poor can't afford volatility or wipeout risk in their investments, because they live with the personal wipeout risk of life every single day. The middle class start to be able to afford volatility, and the rich can afford to take on some limited wipeout risk as well, if the investment is carefully fit into a portfolio constructed around long term goals, and the wipeout risk is constrained to a particular asset. Invest in your own education, so that you can take the fastest path through the first part of your financial journey!

First of all, we view our marriage as permanent. Because of that, it’s not neccesary to think in terms of my money and Mrs. Solving Wealth’s money. It’s all our money. Are you worried that your date is after you for your money? Well, don’t get engaged yet! Their colors will show after a few months to years. Until you are both convinced that the other person is absolutely worthy of sharing everything you own, don’t get married! I know couples that didn’t join their finances, and it seems to work for them. But I don’t know how those marriages work. I know how to make a marriage work where everything is shared.

There’s one exception to this rule, and that’s our personal fun money accounts. Money flows into those accounts based on the budget we built together, and that money is purely personal. That means that the fun money gets spent on whatever each spouse wants, with no judgment: not even a raised eyebrow.1

It’s vital that we stay on the same page about two things: budgets and investments. Every year, we sit down and talk about how we want to change our budget, based on our long term budget rules that tell us whether we are getting a raise, taking a paycut, or leaving things alone. We also redo our budget category allocations after every big life change, like a move. By starting with how much to spend based on rules we agreed to, and allocating the money to each budget category together before we want to spend it on something in particular, we head off most money arguments before they get started.

Within a budget category, we also don’t spend money above a certain threshold without talking first! We haven’t adjusted the threshold up in years, and we probably should, because it’s now about 1/500th of our monthly budget. On the other hand, it’s nice to just send a short text to Mrs. Solving Wealth that I’m paying the property taxes. A simple thumbs up emoji is enough for most things. We have a few exceptions to this, but they are for recurring expenses, like groceries, or all the purchases that might go into a single project, like a bathroom remodel.

We also have a portfolio framework, which is our ideal allocation to each asset class. Of course as assets go up and down, some asset classes grow until they are above their ideal allocation. We have an agreement to spend out of those, unless we have a specific investment thesis we’d like to explore. If we find an asset that we’d like exposure to, we sit down and have a specific conversation about. So for example, Mrs. Solving Wealth might bring me a rental property that she thinks is a great purchase, or I might talk to her about a stock that I think will outperform. We make all investment decisions together, and either spouse has implicit veto authority by just not saying yes. If you can’t convince your spouse that an asset is worth buying, it’s probably just fear of missing out that’s motivating you. That veto has saved the Solving Wealth household from so many terrible investments!

We also regularly game out possible future investment scenarios together. What if cryptocurrency collapsed, or went to the moon? What if real estate values declined by 50%? What would we do if the stock market collapsed? By talking about it ahead of time, there’s less worry about what to do in the moment.

We also game out future expenses and lifestyle decisions together. Do we want a vacation home?2 Do we want golf lessons? Pilot lessons? How many big trips should we take each year? What’s an ideal fleet of vehicles? This is fun! I get to fantasize about spending money with my best friend! We also talk about short term budget decisions, like whether to buy a piece of art and let the durable furnishings budget category go negative for a few weeks by overspending.

Lastly, and we don’t do this as often as we should, we go over our cash flow and balance sheets. At least once a quarter, but ideally every month, I give Mrs. Solving Wealth an update on how we spent our money since the last meeting, how much money is currently available for spending in each category, and how all our investments are doing. I do the paperwork on this, not because Mrs. Solving Wealth can’t, but because I’m a big nerd who actually enjoys this stuff. The regular readouts help keep the trust level up. I get someone asking intelligent questions, which helps me trust that I didn’t make a mistake, and Mrs. Solving Wealth learns about our current financial situation. It’s at these meetings, typically, when we decide whether to cancel Netflix and go to HBO for a few months,3 or whether we want to buy a vehicle.

That trust is the key to a happy financial union. Once we’ve delegated a financial decision to each other, no nitpicking! We trust the other person did their best!

Eliminating money arguments won’t make divorce impossible. But it will remove one cause of marital friction! Resolve to talk to your spouse about your finances: all your finances, and build trust with each other as you decide how to spend your riches!

Does gasoline run in your veins? Do you have a passion for classic cars, for the roar of an engine on an open road? Do you love using a clutch to keep your motor in the power band? Well, this post isn’t for you. This post is about how to minimize the hassle of regularly replacing an inexpensive, reliable vehicle that fits your mission, so you have more money and time left over for everything else in your life!

First, let’s acknowledge a truth abut buying vehicles: dealers are out to get you.1 Americans really only haggle on Craigslist and FB Marketplace, in giant business deals, and when buying cars and houses. Salespeople at the dealers do this all day every day, whereas you wander in only once every few years. They are going to eat your lunch! I worked at a car dealer in the back office in college, and the salespeople would come back and congratulate each other every time they ripped someone off, only to hand them off to the financing person who would really screw over the customer using complicated loans.2 There are entire books devoted to their tactics, how to defeat them, and how to emerge victorious at the dealer. I’ve got a simpler solution. Never set foot on a car lot!

The moment you set foot on a car lot, the chance of paying more goes way up. Even Kelly Blue Book (KBB) will tell you this. When you put a vehicle into KBB, it will give you three prices, the amount a dealer will pay you for the vehicle, the amount a private party will buy or sell for, and the amount a dealer will sell you the vehicle for. The last one is always the highest and the first one is always the lowest. On top of that, the dealer does not respect your time. They employ tactics like, “checking with their manager” and then just go get a coffee in the back.3 They make you go over absurd amounts of paperwork that’s irrelevant. So we’re going to skip all that. We don’t have the time, and why give them the money?

So we’re going to buy our vehicle one of two ways. If it’s a Tesla or another brand that doesn’t do dealers and will sell used, just go on their website, pick out a vehicle that hasn’t been in an accident, and hit buy!4 Also, just as a thing, when you buy a BEV, get the version with the smaller wheels. It will have better ride quality and handling, require cheaper tires, and most importantly, have a higher range!

If, however, you want a “traditional” brand that does dealers, we’ll do classifieds instead. cars.com, cargurus.com, autotrader.com, craigslist.com, ebay.com, and many other sites offer the ability to tell whether a vehicle is being sold by a dealer or not, although many dealers lie on their listings and claim to be a private party, so be sure to discard those! Don’t buy from Carvana, CarMax, or similar, unless you need a very specific vehicle. While they mostly lack the terrible incentives and practices of traditional dealers, their prices are high and non-negotiable, and the occasional negotiation is good for you, at least if it’s an even playing field!

Are you worried you won’t get a warranty? Don’t. The service departments at dealers are where the dealers make most of their money. Even if something is covered under warranty, they’ll try to find something else to overcharge you for. BEVs generally have two kinds of problems: minor ones that you as a wealthy person will shrug and pay for, and the battery slowly aging to the point where the car is junked. One of the reasons that dealers are so hostile to BEVs is because they need so little service. You set aside some money every month with an automatic transaction for maintenance, repairs, and your next vehicle.5 Right? Right?

Next, let’s contact the seller and get the battery health and VIN number. Ask how far the vehicle says it will go on a full charge. Divide that into the EPA listed range.6 Discard any vehicles that are well below the average battery health for their mileage. This means that the original owner was probably hard on the battery, regularly running it down to 0% and charging it to 100%, instead of babying it by running it from 20% to 80% most of the time. This is not a 100% surefire way to tell the battery health, but it will get you close enough, for most vehicles. Before you buy, you should look up the actual battery health check procedure for your model and year and have the seller perform that..

Run the VIN number through carfax and make sure that it’s never been in an accident.7 Unfortunately, there’s a scam that Texas has failed to crack down on, so if the vehicle was originally sold somewhere outside of Texas, but then was retitled in Texas, you shouldn’t buy it. It was likely moved to Texas to hide the accident. Private parties are less likely to do this, but some dealers do it all the time, so watch out.

Pick three vehicles to test drive. If you need to go some distance to get them, make sure that you’ve pre-arranged an inspection at a local mechanic. Don’t start haggling yet. We want the seller to be set up for sunk cost fallacy.8 Also, why put in effort if the vehicle turns out to have some deal killer? For example, I don’t know why, but the Tesla performance seats, which are widely lauded as super comfy, are instant9 back-ache city for me.10

Pick the most favorable vehicle to test drive, get it checked out with your mechanic, and only after you have the bill of clean health, start haggling! We’ll go over how to negotiate in general in a future post, but a good negotiator figures out what the other party wants that you don’t value, and then gives it to them in exchange for something you do value, which is generally a lower price. Perhaps they are interested in a quick sale, or perhaps they want someone who’s going to really love the vehicle. Figure it out, and play to your strengths, but also don’t be at all afraid to walk away. There are plenty more vehicles out there. Negotiation is a life skill, and this isn’t wasted time. Practicing here will pay dividends enormously on houses, job offers, business sales, future vehicles, etc.

The seller may be worried about scams. Unfortunately, that’s part of life these days! Once you reach an agreement, you should both sign a quick "bill of sale” document, which you should have printed out and brought with you. It will say that the seller is selling you the vehicle, and have blanks for their name, price, the VIN, etc. Make sure that the bill of sale specifies that they turn over not only a valid title, but transfer control in the associated app and any accessories you want as well!

Then, offer to go with them to your bank and they can watch the cashier write a cashier’s check as they sign over the title. That way, they can be sure the cashier’s check is genuine. Alternatively, you can send them cryptocurrency such as US Dollar Coin (USDC), or even pay cash! However, if you are going to use USDC or cash, meet in a physically secure place! Never use Venmo, PayPal, Cash App, Zelle, etc. to buy a vehicle. These apps are not designed for this use-case, and there’s a good chance they will flag the transaction as fraud even when it’s not, creating enormous hassle.

Note that nowhere in this process did I talk about financing. Simply put, it’s not worth your time. Even if rates, which are above 5% as of the time of this writing, go back down, you might only earn a few hundred dollars on the time value of that money, even for a pretty expensive vehicle. And all the readers of this blog have plenty of cash to write a big check, because you’ve been saving up with an automatic transaction. Right? Right?

Lastly, it’s time to get the vehicle registered, insured, buy accessories, and customize it for you! And then, of course, you probably have a vehicle that you need to sell as well. But those are posts for next time!

Buying a BEV from a private party will take the same amount of time or less as buying from a dealer if you do it properly. It will likely save you at least 10% the cost of the vehicle, so following this process is almost certainly worth your time!

It used to be that buying vehicles was super easy for rich people.

1. Take about 10% of your monthly spend, preferably a bit less, and set it aside for your next vehicle purchase.

2. When one of your vehicles needs maintenance, take that out of the money you set aside.

3. Every so often, add up how much your vehicles are worth using sites like Kelly Blue Book or CarGuru’s Used Car Price Trends, and when your set-aside money plus the value of your vehicles is consistently falling because of maintenance, go buy a used high end vehicle to replace the one that’s turned into a money pit. Personally, I liked to buy 6 year old Acuras with low miles, and I’d dump them at about 180K miles, because they had very predictable maintenance needs.

You could still do that, if you like. This “buy high end, replace rarely,” strategy is optimal for any sort of technology that’s changing very slowly. And let’s be honest, until recently, vehicles just weren’t getting better that fast. I used to have a 2006 Acura with automatic emergency breaking and adaptive cruise, so even “new” safety features are old enough to vote!

However, and this is really important! Do not buy any vehicle that still has a Takata airbag in it. Takata cut corners and designed airbags that slowly absorb moisture from the air and over the years transform into what is effectively a loaded sawed off shotgun aimed at your head. Then they declared bankruptcy and closed up shop, leaving everyone else to clean up their mess. Don’t be frugal here! Check for Takata airbags and just say no! If your current vehicle has them, get them replaced or junk it!

Let’s say that you want the new hotness in transport: a BEV (battery electric vehicle). BEVs are getting better very rapidly, so it makes sense to buy the lowest end vehicle you can get away with and replace it as often as you can put up with. In 2014, a BEV that got 200 miles on a charge was doing well! Today, for the 2024 model year, a vehicle has to crack 400 miles to impress. Future vehicles show every sign of improving dramatically.

And there’s good reason to get a BEV. Rich folks have the luxury of not worrying about cash flow. So if the cheapest thing for our lives takes more money up front, whatever. We don’t need to care. Most people know that electricity is a super cheap fuel, but good BEVs also need dramatically less maintenance. That, in turn, means we have to spend less of the one quantity we can’t buy more of: time.

Time spent going to gas station is wasted time. Time spent stranded because some system broke unexpectedly is wasted time. Time spent taking a vehicle in for maintenance is wasted time. Good BEVs are dramatically more reliable and have maintenance schedules that read like this for their first several years:

1. Change tires when the tread is low, and rotate them annually.

2. Refill windshield wiper fluid when the little light turns on.

3. Replace cabin air filters when they get clogged.1

Unless you enjoy “doing car stuff” for fun,2 you want a BEV.

Generally, a vehicle is going fall into one of a few “mission classes”: prestige/luxury/comfort, racing, “work,”3 adventure, and beater. This blog’s audience can afford a top 1% vehicle for any of those missions, especially if they don’t buy new.4

Personally, my dream fleet consists of a luxury SUV for attending galas or going on long trips, a roadster for fun, a work truck to indulge my construction fantasies, and a reliable beater so I have the option to not flex on people and not attract attention.5

With combustion vehicles, there are many gotchas if buying used, but with BEVs, a 30 minute visual inspection by a vaguely competent mechanic and pulling the battery health is basically all you need to do.6 Batteries lose range over time, and you can look up what "average” is for your prospective model and year, and see whether your potential fleet addition is above or below the competition. A combustion vehicle will work pretty well until the transmission or engine fails, often catastrophically. At that point, you may want to junk it. A BEV gradually loses range until it’s not worth driving, at which point junk it. Pretty much everything else is worth fixing.7

Ok, but how do you decide what to buy? Here’s a checklist:

1. Unless you plan to use the vehicle only around town, is it a Tesla? If not, is it a Ford or another brand that will have access to the Supercharger network? The Supercharger network is the only way to take a long trip. Day to day, you can charge up at home off a normal outlet, or if you drive many miles on back to back days, a charger that your electrician can put in your garage. But for a long trip, accept no substitutes for the Supercharger network. Using it is just like a road trip with a combustion vehicle, and using other networks is gambling whether you will get stranded.8

2. Does your manufacturer have a history of spontaneous combustion? (If you are buying an older Hyundai/Kia or GM BEV, the answer is yes, because the same company designed both batteries.) It’s pretty stupid that this is something you need to check for, but some companies seem to be wildly incompetent.

3. Does your model come from brand with a history of building batteries that degrade quickly? (If you are buying a Nissan, the answer is yes. Just don’t buy a Nissan for this reason, as early model LEAFs lost battery health at many times the speed of the competition.)

4. Does your specific model and battery have a battery history you can look at? Many brands are just getting started, and some batteries degrade much faster than others. However, if you are looking at a LFP9 battery, you can skip this step, as LFP batteries will, barring gross engineering incompetence, outlast the vehicle.

5. If it’s a Tesla, don’t purchase the first 4 model years of any particular model. For whatever reason, while Teslas have bulletproof drivetrains, everything else is often rushed for the first few years of production. So Model S is fine for 2016 and later, Model X for 2020 and later, Model 3 for 2021 or later, and Model Y for 2024 or later. Don’t get a Cybertruck until the 2027 model year.10

Once you’ve picked out the mission, go find the battery degradation curve online.11 Make sure that the vehicle ages more like a Tesla Model S than a Nissan LEAF. Go buy the oldest vehicle you can with the best battery health. Don’t get attached! Like cell phones in the 2010s, you’ll want to swap for newer and better regularly!

Especially as you climb north of $10M, spending 10% of your budget on your toys is a large amount of buying power! Add in the value of your time, and your choice of vehicle can be the difference between being able to squeeze in all sorts of extra purchases, experiences, and time with the people who love you. So invest a little bit of time up front, and you’ll earn dividends, both monetary and in your schedule, for years to come!

We’ll go over how to actually buy that vehicle that next post. Stay tuned!

Well, I’ve got some bad news for you. No. That’s cute, but it’s not practical for most folks. If you read this blog, you are probably a high income or high wealth person, or at the very least a person on a path to a high income and wealth. For you, any choice you make to save “just the right amount” is a choice to give up free money and make the world a poorer place.1 You like free money, don’t you?

The reasoning is a bit subtle, but let’s step through it. First, I’m going to assume that you want your money to last more than a couple decades, whether that’s for yourself, your loved ones, or a cause you care about. If you have no one that you care to leave your money, then yes, you can spend it all right down to precisely zero. But, also, you’ve got a problem! The most rewarding thing a human can do is to help the happiness of another human being! Go find someone or something to leave your money to!

So assuming you want your money to last more than a couple decades, and you’re still aiming to die with zero, you’ve got another problem. There are very few asset classes that will claim to give you a predictable cash flow that far out, and they are all terrible. The more predictable they are, the more terrible they are! On the other hand, the asset classes that generally grow strongly over the long run are totally unpredictable over the short run!2 So without the ability to know where your portfolio will be, how do you plan to die with zero?

Then there’s the issue of lifespan. In 1950, 50% of all baby boomers born that year were predicted to be dead by the end of 2018.3 In 2021, 74% of them were still alive!4 Say you are aiming to leave your money to your grandchildren, who are now 5 years old. How long does that money need to last again? How could you possibly know?5

But what about that financial advisor who told you in their soothing voice about how if you let them handle it, they’d make sure it was all ok? They’re not lying, exactly. They can probably insure you against going bankrupt. But they’re taking all your free money for themselves and their real clients, the people selling that financial product. You’re not the actual client. You’re the livestock. (I’m sure the dairy cows like the farmer also.)

Let’s say you want to buy the “safest” long term financial product in existence. That’s generally acknowledged to be a US Treasury bond. However, while you will almost certainly receive the exact amount of dollars in return for your purchase, how do you know how much stuff those dollars will buy? Inflation and taxes are a thing, after all. I’m writing this in 2024, and people in 2019 would have sworn up and down that 9% inflation was impossible in the next decade, but year over year CPI hit 8.99% in June of 2022!6

Let’s say you buy a 20 year bond that pays 5%. First, we pay taxes. Fortunately, there’s no state tax on Treasuries, so let’s say that you end up paying 20% as an average tax rate back to the Feds, although readers of this blog are more likely to pay closer to 30%. So now you only get 4% (5 * 0.8 = 4).

But then inflation is a thing as well. You are not a hermit, so you have to pay for home repairs and taxes and doctors and grocery checkout clerks and so on. Their costs are going up, so yours are also! Let’s say that inflation averages 3.5% over the lifetime of the Treasury. So now you are getting 0.5%. Ouch! That’s not much to live on! You’re going to have to spend down the principal and hope you and your heirs die young!

Ok. What about inflation protected bonds? Those are a thing, right? Yeah. Problem is, they pay a lower yield, so we’re right back where we started! Tax exempt inflation protected securities? Even less money, and now we’re having to go to states instead of the Feds to buy our bonds, so we’ve introduced a risk that the state will go bankrupt. That happens! It’s rare, but it’s a thing!

Every time we try to clamp down risk in one place, it bubbles up somewhere else. But what if we buy a whole life indexed insurance policy and overfund it with a guaranteed minimum return and inflation protection and borrow against it so the withdrawals are tax free and then the policy can pay itself back at your death? I saw this super sleezy sales-droid trying to sell me that and my eyes glazed over with how complicated it was.

Look. I’m not going to tell you that those products are always a bad idea. But they are complicated, they usually lock you in for decades, and wow are they expensive! And what’s that insurance company going to do with your money anyway to guarantee that return? (I promise they don’t have a money tree.) Turns out, they mostly just buy stocks or real estate, take a cut, and use the rest to pay for your returns. And that “downside protection”? Their plan is that if the market goes bad enough so they can’t cover it, they will declare bankruptcy and let the government mandated insurance7 fund bail out your policy.

It’s not that that bail out won’t happen. It’s just that in a future where the economy is totally crap and your giant insurance company is bankrupt, what else is going wrong? “Too big to fail” is a thing. But the next category up is “too big to bail.” Just ask British folks who invested in Icelandic banks what happened in 2009. There was literally not enough money in Iceland to cover it, so rather than bail out the British and indebt their great-grandchildren to cover it, the Icelandic government, very politely, gave the British the middle finger and reoriented their economy around tourism. So ask yourself. Who’s guaranteeing your downside protection, and what is their threshold for deciding to let you fail?

I hate to break it to you. I really do. But there’s no such thing as a “safe” investment for the long run. You either take the risk of losing all the digits in your bank account, or you take the risk of your digits becoming worthless even if the numbers haven’t changed.

But have heart! This is a good thing! It’s freeing! It means you can stop chasing the impossible and start chasing the probable! Companies, people, and governments come and go, but the human endeavor is mostly up and to the right! There are crashes and crises, but the history of humanity is one of picking ourselves up and making the future better than the past. We screw up, we work twice as hard as if we’d done it right the first time, and the world gets better.8

So what to invest in? If you want the lowest hassle portfolio, put your money into a broad, no load, low cost, market cap weighted stock market index fund from an issuer who can’t change their fees after they get you locked in.9 Check it once every year or two, and spend your life on things that matter.

If you are still working, I can guarantee it will crash. But guess what? Buy more while it’s on sale! If you are retired, you will need perhaps 5% to 10% worth of “ballast”10 to rebalance in and out of. Personally, I like precious metals or real estate for that. Again, I guarantee that this investment portfolio will crash! But guess what? It’ll come back, and if it doesn’t, it’s probably the end of the world, all money is worthless, and you’ll need to fall back on your backup portfolio of canned goods and bunkers.11 That stock portfolio will, in all likelihood, wildly outperform any sort of “safe” investment. You’ll live a richer life for it.

Real estate can also do very well, better than the stock market, but you will need to get good at it. I call being good enough to outperform the stock market “investing superpowers.” You will need an investing superpower to go beyond stock market index funds. In real estate, this isn’t that hard to do, but it will take some study and some time, and that is a post for another day.

Embrace a little bit of uncertainty! Honestly, most of the risk is “upside risk”12 anyway. If instead of aiming for your investments to be inflexible, you add just a smidge of flexibility to budget year to year, you will be able to pick up that free money.

So lift your eyes to the horizon! No one can guarantee you safety, but I can guarantee that if you learn enough about this subject, you will sleep very well at night, satisfied in the knowledge that you and yours are amongst the most secure humans who ever lived.

Consider the trade-off of time vs. money. Like most commodities, there is a supply and demand curve for time. Sorry for the economics lingo!1 “Supply and demand curve” is economist for “As the price goes up, I’ll buy less of it.” However, because it’s literally impossible to trade time with someone directly,2 each person values time different using their own curve, and that curve might not even be consistent! We’ve all had the experience of desperately needing time one day, and sitting around with less to do other days!

Consider the implications of this! A billionaire still only gets one minute per minute. Dekamillionaires3 get one minute per minute. The poorest people on Earth get, you guessed it, one minute per minute! Therefore, the value of time varies by as much the variability in spending. How much is your time worth?

Understanding the approximate value of your number is key to living a rich life. Just as we are frugal but not miserly with money, we must also be frugal but not miserly with time. There’s a fine line between stressing over each moment wasted and spending our time richly, but we make that decision every day whether we like it or not. After all, we can’t hoard time.

So how much is your free time worth? For most Americans, we can subtract out various activities like sleep, hygiene, eating, exercise, socialization, chores, and the paperwork of adulting. Out of the 168 hours in a week, a healthy lifestyle will lose at least 50 to sleep, at least to 10 to eating and food prep, another 5 to exercise and hygiene, and probably an average of 10 to paperwork and chores. We are all of us tribal primates, and will literally die of lonliness and isolation, so we can probably factor another 10 hours a week to spend time with loved ones, even if we’d prefer more. So we are left with 83 hours a week, or if we are living rich and full lives, probably closer to 70 hours that we may spend each week as we please. Folks who are still working may have more like 20-30, depending on their commute, or they may not be meeting their basic needs and actually have negative free time!4

For a nice round number, say you have $10M in investible assets and are retired on $30K/month, pre tax. Your 70 hours/week of free time might plausibly be worth about $90 each, post tax, if you had no structural expenses. But you do! Your house needs maintenance and upgrades, your vehicles must be repaired and replaced, you must pay for vacations, and education, and food, and all the other items that go into a modern upper middle class life.

So now we reach the heart of the trade-off between time and money. Every line item in your monthly budget reduces your hourly rate. In choosing to spend money on, for example, a nicer house, you are choosing not to buy a service that will save you time, for example by hiring cleaners. You are also choosing to spend your time maintaining that house! Still liking that fancy high maintenance house? On the other hand, if you buy a dishwasher, you are revealing that you value the money cost of a dishwasher less than the time cost of washing dishes.

Economists have another piece of lingo that they like to use here: “revealed preferences.” It basically means, “Yeah, yeah. We hear you saying how much you value this, but words are cheap. What you do says how you really value this thing.” I regularly ask myself whether I’m being a hypocrite, or whether I’m truly living my values. Part of that is spending my money consistently across my entire budget.

Let’s assume, for example, that you don’t mind cleaning, but you don’t like it either. And you have the opportunity to purchase time from a housekeeper at $50K/year, which works out to about $25/hr. Should you do it? You are literally buying back your time here. Basically, it comes down to whether your surplus budget is worth more than your surplus time. If you genuinely value your time at more than $25/hr, this is a no brainer.

Or is it? The cleaner won’t magically understand your preferences. They are a real human being, with all the glorious and messy preferences, likes, dislikes, and life complications that entails. They are not a magic wand that produces tidiness and cleanliness. You will spend time and energy expressing yourself, supervising, helping them with their troubles, etc.5

If you go with a cleaning service instead of an employee, the rate will be higher and the personal relationship lower, but there’s still overhead, and now there’s issues of trust, with an endless parade of new faces through your bedroom every week. Still, if we do a good job selecting the person or service, we can buy back some time here. To be safe, we should probably add some overhead. Let’s call it 50%, which means that in this example, we are revealing a preference to purchase time for anything less than $37.50/hr.6

Now let’s look at the other side: selling time. Would you spend an hour on an activity that you neither hate nor love in exchange for $20? $50? $900? Or perhaps you work, in which case you can just take your hourly rate. (Remember, you can get a rough hourly rate by taking your yearly compensation and dividing by 2000. So $400K is $200/hr, $200K is $100/hr, and so on.) Hopefully the number you buy time at is lower than the number you sell time at!7

How much would you pay to not clean your house? How about a meal service? Laundry? A driver? A home with a shorter commute? Why aren’t you buying back your time?

There are several possible good reasons. Perhaps you hate the idea of having someone tromp through your bedroom to clean it. Perhaps cooking is a hobby. Perhaps you want the budget flexibility, and it’s difficult to buy a small enough amount of time to make sense. But perhaps, you are being unreasonably frugal and think that you’re saving money when you’re really just being miserly and shortsighted. An hour spent washing dishes is an hour not spent visiting your parents, or reading a book, or petting a whale, or getting the genuine joy of going out of your way to improve someone’s life!

Look, it’s fine if you don’t have an exact number for what your time is worth. We are not perfectly logical spending robots. The idea is to get a vague number, and to have that be generally consistent across your entire budget. And of course you will adjust that based on your other preferences. You will spend more per hour to get rid of activities you hate, and you will gift time or sell your time at a reduced rate for activities you love!

The next time you look at your credit card or checking statement, see if anything jumps out at you. What are your revealed preferences for your hourly rate? Is it consistent? What’s the lowest value way you spend your time? What’s the highest? What’s your plan to increase the value of your time?

You may see neighbors and family who spend their money quickly. Ironically, due to the nature of wealth, they may be able to keep this up for a decade or two! You may feel envy at their lack of cares. But any entity which spends faster than it earns will end in ruin.2 If you have a problem with this, get over it! The alternative is losing your wealth!

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Reframe your internal view of money to be safety, security, and options. Money is for spending, but spend much of it later, and save most of it for the future!

It's impossible to achieve wealth early in life and spend it down to zero precisely at your death. That's just not the way the math works. In the end, you will either have way too much, or way too little. I know which one I'm aiming for!

The first key lesson for achieving and stewarding wealth is understanding what spending truly is and is not. Spending is anything that makes your net worth drop. Earning is anything that makes your net worth rise. This is different that your accountant’s definition. This is different than the IRS’s definition. But this is the definition we will use, because we must sharply define our ultimate goal.

Investing, therefore, is the act of trading cash for ownership, in the hopes of future earnings. Or, it is the act of trading ownership for cash, in the hopes of preventing future spending. Your luxury car, therefore, is not an investment. It is spending. Your personal residence is also probably not an investment. Unless you purchase the absolute minimum asset to meet your actual need for shelter and transportation, you are spending.3 Beware of spending masquerading as investment! It’s hard to pull out a credit card often enough to spend down a great fortune. But no one is ever more than a single bad judgement away from ruin when they are “investing.”

Ok. Enough philosophy! Let’s get down to budgets! How much is reasonable to spend each year? If you are not yet FI (financially independent),4 then this is pretty simple. Save at least 50%, and preferably closer to 75% if you are a high earner. At this rate, just a few years of a modest lifestyle will put you on track for a lifetime of higher spending.

If you are already FI, congratulations! Stop and celebrate! This is a massive milestone! This is the beginning of an ever increasing trajectory for your lifestyle, even though you may occasionally see a dip. In your first year of FI, it's generally safe to spend about 3.6% of your liquid net worth.

There are situations where that percentage might be higher. Talk to your insurance agent. If they tell you that you are less than 30 years from end of life for the last of your heirs, then your spending can be higher. If you have investing superpowers and can out-earn the stock market consistently for multiple decades, you can safely spend more.5 If you have a financial advisor who can outperform the stock market, you can push this higher. Kidding! That person mostly doesn’t exist! If they could really outperform, why would they bother with you? They’d already be wealthy, and they’d have fired you as a client a long time ago. Really. The next Warren Buffett isn't working for your local wealth advisor. I promise.

But that's OK! A person who earns average returns for decades will actually do better than the vast majority of investors. Repeat this to yourself. Average is great, and chasing outperformance generally means underperformance.

There are many situations where your initial withdrawal rate might be lower than 3.6%. If you are focused on wealth building, you might choose to start lower, so that your money grows faster. If you don’t invest aggressively in either the stock market or asset classes that keep up with the stock market, then you will need to start lower.

What percentage is safe after that first year? If you are still working, then as long as your earning is a high fraction of your spending, stay at that initial rate. But if you stop working, or your work becomes your side hustle to your increasingly successful portfolio, then there are three basic strategies you'll find online, two of which are pretty useless.

1. Adjust your spending each year by inflation, and don’t change it otherwise. This is a silly strategy, because this strategy will slowly turn you into Mr. Scrooge, sitting on an ever increasing pile of wealth and never improving your lifestyle.

2. Keep your spending to precisely 3.6% of the current value of your portfolio. This is a silly strategy, because you will be required to spend wildly in bull markets, and cut your spending overnight by 75% or more in bad times! No one wants to live like that.

3. There’s a middle ground. For this strategy, let’s adjust our spending upwards or downwards by 20% plus inflation each year. Last post, we noted that this was the minimum noticeable change that one feels. If we can stay under the target while increasing spend by 20% plus inflation, great! If we have to leave our spending as is and only adjust for inflation, fine. And if we need to lower spending by 20% plus inflation, we’ll do that instead. Taking a spending cut won’t happen often, but it will happen a few times in your lifetime.6 Each year, we will lower our target withdrawal rate by 0.1%. So if we started at 3.6%, year two is 3.5%, and so on. This gradual lowering the bar is for safety in the long run. By year 24, we will hit 1.2%, which is plenty safe, and we won't have to go any lower.7

   There are a few other similar named strategies. CAPE, Guyton-Klinger, and this strategy all trade away your ability to quickly up your spend during good times for the guarantee that you won’t have to quickly cut your spend during bad times. You may have noticed that almost all massive busts in the markets are proceeded by massive booms, and these strategies force you to stay cautious and not buy into the hype of a bubble.

   Occasionally, there are massive busts in the market that aren’t preceded by a bubble, but many of those see a quick recovery, as the market panics and then walks the panic back. So by never overreacting to either the upside or the downside, we are insulated from the year to year gyrations between hype and fear in the markets, and get to experience a stable, mostly even lifestyle.

When confronted with the idea of great wealth, many people have an emotional reaction. Some go wild with greed, imagining themselves having and spending it. Some go wild with envy and anger, imagining someone else having and spending it. To resist these destructive urges, understand that wealth is a great gift, but that it is not solely yours. Your portfolio may seem abstract, because you interact with it as numbers on a screen, but that screen controls real consequences in the real world for real people.

Understand that you are highly compensated, and you may take a portion of this gift for yourself each year.8 But the vast majority of it must remain invested for next year and the next generation! If you spend it down, real people will take down real factories and plow under real farms to pay for your toys and vacations. Real jobs and real productive capacity will be lost. If instead, you wisely steward the wealth, then a steady stream of riches will flow to you and yours forever, and the human project will continue onwards and upwards.

Let’s start with the obvious. Modern life requires shelter, food, transport, healthcare,1 security, etc. And money definitely buys those things. At the personal level, being rich ensures that your supply of each of those things is mostly uninterrupted and of high quality. So being rich definitely removes some sources of unhappiness.

But can being rich actually make you happy? Perhaps you’ve heard that above a certain pretty moderate amount of income, being rich won’t actually make a difference. Well, in my personal experience, that’s complete hogwash, and I’ve got science to back me up!2

Happiness and a general state of wellbeing is the default state of humanity, in my opinion, if our needs are being met. However, we are a hopelessly needy species, and it’s also true that it’s basically impossible to meet our needs completely. Therefore, we increase our wellbeing not by adding goodness to our life, but by subtracting badness.

Obviously, bad things can happen even to billionaires. We are all of us weak hairless primates, and no amount of money can insulate our lives completely from random meteors, eventual death, or a hurled insult.3 So the central question around wealth, therefore, is how to find the best long term balance between delaying gratification to meet needs later, vs. spending to meet needs now. How much is enough?

What’s the actual relationship between money and happiness? Double the money, double the problems? Or double the money, double the happiness? Neither! If you are broke and I offer you $10K, that’s amazing! But if you have $1B and I offer you $10K, um, sure. Thanks? Economists call this a “decreasing marginal return,” or in normal human speak, your first dollar is worth way more than your last one. In fact, the happiness research appears to suggest there’s a logarithmic relationship. With each step up the ladder of wellbeing, it takes an exponentially higher amount of money. And I don’t mean that as a metaphor! Literally, each step up the ladder appears to require about 1.2x more than the last one! Without careful tracking people appear to not even notice unless their spending increases by 20%!4

Let’s start with a subsistence day laborer at the global line of extreme poverty, or about $2.15/day ($785/year). This person lives on the edge. Any disaster of even medium size, and they will literally die, especially if it strikes their whole community.5 Let’s define this as a 1 on the spending ladder. Sustaining this level of spending indefinitely without work requires about $22K invested permanently in the world’s capital markets.6 If they live in an average household size for the USA,7 they will need about $56K. (See rung 1 on the ladder below).

Where are you on this scale? Median household income in the USA is a bit over $75K, which requires $2.083M invested in the markets. On our ladder, that’s a bit above a score of 20. Again, this is without working. How about that family that saved up $10M? That’s a 29. What about your fabulously wealthy friend with $50M? About 38. Lastly, let’s put Jeff Bezos and friends on our scale. Actually, let’s do it visually, marking each rung with the net worth necessary to produce that income indefinitely.8

1. Net Worth $56K => Income $1,970/yr - Global Extreme Poverty Line.

2. NW $66K

3. NW $79K

4. NW $95K

5. $113K

6. $136K

7. $163K

8. $196K => Income $7,060/yr - About ~18M Americans lived below this line in 2022.

9. $235K

10. $282K

11. $339K

12. $407K => Income $14,640 - This is close to the USA poverty line for 2022, covering about 12% of the population.

13. $488K

14. $586K

15. $703K => Income $26K/yr. This is close to the Swiss poverty line in 2019. Almost 9% of the Swiss population is poorer than this. Also, only 1% of humans in 2018 were higher than this rung. If you are reading this blog, you are probably “The 1%,” at least globally.9

16. $843K

17. $1.01M

18. $1.21M

19. $1.46M

20. $1.75M => Income $63K/yr. This is a bit below the USA Median Household Income for 2022. Half of all American households fall below this line.

21. $2.10M

22. $2.52M

23. $3.02M

24. $3.63M

25. $4.35M => Income $157K/yr. The top 10% of Americans live here approximately or above.10

26. $5.22M

27. $6.27M

28. $7.52M

29. $9.02M => Income $325K/yr. The median family in the USA could make it to this level through a lifetime of saving intelligently in a single generation, and have enough time to enjoy it! They don’t, but they could!

30. $10.8M

31. $13.0M => Income $468K/yr. “The 1%” lives above this line, at least in the USA.

32. $15.6M

33. $18.7M

34. $22.5M

35. $26.9M

36. $32.3M => Income $1.16M/yr. “The 0.1%” lives above this line, at least in the USA in 2022.11 The air is getting pretty thin here, but there’s still over 33K Americans and a bit more in the rest of the world. Private jet rides are still a bit of a splurge here. The billionaires you see on TV are all still 30 times wealthier than this!

37. $38.8M

38. $46.6M

39. $55.9M

40. $67.0M

41. $80.4M

42. $96.5M

43. $116M

44. $139M

45. $167M

46. $200M

47. $240M

48. $288M

49. $346M

50. $415M - Sorry, I’m getting bored just typing all of these out! We’ll go by 10s from here.

55. $1.03B => Income $37M/yr. Finally a billionaire! So these folks are like, basically the same as Bezos, right? Wrong!

60. $2.57B

70. $15.9B - Surely we’ve hit Bezos, right? Wrong!

78. $68B - Approximate net worth of Satoshi Nakomoto at the 2021 peak BTC price.

80. $98.5B - Remember, Bezos can buy and sell this person several times over!

83. Pity poor Elon Musk, several rungs below Bezos. I mean, sure, his personal space program is better than Bezos’s, but Bezos owns the Washington Post and Musk’s Twitter acquisition just isn’t looking that hot. #hectobillionaireproblems

87. Finally we hit Bezos at just past the 87th rung on the ladder. Imagine how much he’d have if he’d been able to keep his marriage together!12

95. $1.5T - Bezos would need to move up the ladder just a bit to hit here. Alternatively, this is the entirety of the sovereign wealth funds for the country of Norway, which is just about the richest sizable democracy.

So what’s the takeaway here? First, money doesn’t guarantee happiness, but it sure looks correlated in a semi-causative way! (This is science speak for, “Yeah, it probably helps most of the time.”) Second, wasting your time worrying about your tax rate is obviously a waste of time. Do a bit of tax optimization, duh, but if you can move up 5 rungs through investing and earning, but only 1 to 2 rungs through extreme tax planning, don’t waste your time!

Next, understand that the richer you get, the poorer you will feel, and if you let it, that will really make you feel bad about yourself! After all, when there’s only ~30K Americans to hang out with in your 0.1% social circles, plus another few 10s of thousands globally, you’re going to rub shoulders regularly with someone who’s dozens of rungs above you! And you will never be as rich as they are, so get over it! The middle class get to hang out with their peers. The rich have to hang out with people who are much poorer or much richer than they are. Learn how to do it gracefully.

Lastly, understand when to quit chasing money! By the time you hit the high 30s on the ladder, you are a very, very rare person. You are already a high achiever. The difference between you and the next few rungs up is mostly luck. So count your very lucky stars, and focus on maximizing your enjoyment of what you have! I strongly believe it’s possible to move up your experience of the ladder through efficient spending. Stay with me on this blog, and we’ll go over how!

So what’s the ideal monthly budget? First of all, budgeting is a lifestyle, not a monthly task. Budgeting is a loop:

1. Look at your spending, in detail, from multiple directions.

2. Decide how your spending reflects your values. Do you want more time with family? Do you want to increase your giving? Do you want to expand your horizons through travel or toys? Who do you want to share your life with? For each expense, was it a better or worse expression of your values than the rest of your expenses?

3. Remember the lessons of expenses past, and make sure that your future expenses better reflect your values. Budgeting isn’t an all at once thing. It’s a gradual improvement over time.

Ok, so that’s a nice set of platitudes. But I promised hard core budget nerdery, and I’m going to deliver! First, we’re going to need categories or tags. Tag every expense, or sort it into a category.1 There are a bazillion tools for this, from doing it manually in a spreadsheet, to specialized software like YNAB (You Need a Budget) and competitors.2

I’m reasonably agnostic on which categories you use. You should pick categories that make sense to you and your life. Don’t feel overly constrained here. The purpose of the budget is to maximize value against the genuine constraints that life imposes on you, not sort your life into little buckets. On the other hand, little buckets make for clean thinking and clean data, so pick a middle ground that works for you.

However, for anyone I coach who’s looking for this kind of budget, I always demand they have at least three categories of buckets: fun/easy to cut, delayed, and mandatory. Here at Solving Wealth, we divide subdivide fun into Mr. and Mrs. Solving Wealths’ individual budgets, which each of us has complete and 100% dominion over, and joint fun, which is mostly spent on travel. We also have a giving budget, split between charitable and personal giving, and we divide up delayed spending into automotive, medical, house repairs and upgrades, and durable household goods. Our mandatory spending is split into groceries and non-durable goods, personal services (house cleaning, house maintenance, lawn care, prepared food, etc.),3 utilities (insurance, fuel, electricity, internet, mobile service, etc.), education, and loans (we have one of those unicorn 2.5% mortgages, which we are not paying off early!).

If a budget category is underspent in a month, we add that on to next month’s budget. If a category overspends, then sometimes a budget starts out negative! Look, I’m not a monster. Very occasionally, a budget category can go negative. But that requires trusting your future self to hold back on spending until it gets back to zero. Can you trust your future self? Remember, trust is built with a track record over time, even when it’s you on both sides of the relationship! Without that track record, you’re going to have to be strict!

Fun is the most important category. Without an outlet, resentment against your own budget will build up until it bursts into your life in an ill considered splurge on something you will regret later, and that trust will be lost. For folks who are already FI (financially independent), I recommend it be set to at least 15% of your total spend, and potentially as much as 25%+! If you are early on your financial journey, then it might be more like 5%, or the minimum necessary to prevent you from going crazy over the long run. The richer you are, the more you should spend on fun and giving, not just in dollar terms but in % terms as well!

Fun money is not allowed to be spent on anything useful! If you have a partner, then it’s strictly forbidden to even hint at criticism about how that fun money is spent! And absolutely, positively, no hoarding! It’s fine to save up for a really big useless thing, but no saving fun money just to have it! Fun money is for the useless things you want, but don’t need. No exceptions.

We aim to spend:4

• ~17% – giving

• ~17% – fun

• 33% – delayed

• 33% – mandatory spending

Someday, I’d like to be rich enough to get to this much more responsible and grown up budget:5

• 25% – giving

• 25% – fun

• 25% – delayed

• 25% – mandatory spending

Ok. That’s how the Solving Wealth household budgets month to month. Later in this series, I’ll go over year to year budgets, and we’ll also start diving into some topics like maximizing the after tax value of spending. But I also look forward to sharing my thoughts on investing and portfolio allocation, getting good value on toys, houses, vehicles, and vacations, and even more generalized advice! Stay tuned!

The easiest budget is one that you just naturally follow, without ever categorizing an expense or balancing a checkbook.1 Some people just have a sense of what kind of lifestyle they want, and happen to make a lot more income than that, either through work or investing. Great! Problem solved! But what if that’s not you?

The next easiest budget is sometimes called “a reverse budget.” Basically, you set up a couple sets of automatic transactions to pull out part of your portfolio or paycheck every so often, and then spend every cent you have of what remains.

If you are already FI (financially independent), then the first transaction you’ll have is a transaction that pulls money out of your portfolio each month. If you’re working, it instead dumps money into your retirement accounts, and ensures a high savings rate.2 Remember, even if you manage to invest your way to wealth, you won’t keep that wealth unless you keep your spending under control.

The second transaction helps you save up for big expenses. Set aside money each month for your next car, a wedding, a down payment for a house to live in, your kids’ or grandkids’ college, etc. For those of you who have a monthly spend over about $150K, then you might not need this, because you can just pay out of your monthly normal spend. On the other hand, you are probably saving up for tax payments, expensive art, a new plane or yacht, or a giant donation, so this is still a good idea. Nobody, even billionaires, should YOLO any spend above about half a month’s expenses!

So say you make $30K/month (after tax), and haven’t hit FI yet. Try to put $15K towards retirement, and put another ~$5K towards future big ticket items. Then, just spend everything that’s left! Congratulations! You just started a countdown towards financial freedom! You’re on autopilot towards money becoming less and less of a barrier in your life to anything you want to do!

Or, say that you are already FI, and have $15M, which translates into an initial safe withdrawal rate of $45K a month. You’ll need to set aside money for taxes, so work with your CPA to ensure that money is flowing into that “big expenses” account from that $45K. Decide how often you want to replace your car, fund a special charity initiative, buy a new toy, or take an ultra luxury trip. Set that cash aside, and go nuts with the rest!

But what if this doesn’t sound organized enough for you? Or what if you’ve tried this and you just can’t make it work? Stay tuned for our next post, where we’ll talk about more complicated budgets. (Hey, I’m a big nerd, so I actually like eating my vegetables doing budget spreadsheets!)

What’s wrong with everybody? Are they stupid? Are they lazy? Do they not care about their futures? No. They don’t budget towards a goal of being or staying rich, not even in the most minimal sense.

Are you rich? Do you want to stay that way? In 2022, the median household income in the USA was $74,580. As a personal goal, taking in almost five times that is a perfectly reasonable goal for an ambitious and hardworking person in the developed world. And not just now, but forever. Without working.

$30000 worth of monthly spending requires about $10M in investible assets. You, your family, and your heirs will have all that cash every single year from now until forever. What’s the catch? What’s the cost? It’s remarkably small. It’s just a tiny little thing really. And yet so many people refuse to do it. All you have to do is budget towards that goal. Consistently.

Most people think that budgets are complicated, but they don’t have to be. Can you look at your phone and see how much money you have left in your account this month? Can you look at a different account and choose, every single time, not to pull money out until you hit financial independence, and then, only the amount that a simple formula tells you? Can you set up an automatic monthly transaction, and an automatic annual transaction, and occasionally reset them? That’s all2 that’s required.

Of course, budgeting is an art, and like all art, skill will make you better. A great budgeter will probably live twice as nice a lifestyle on the same budget as a terrible one who still gets rich. But can you hit that minimum standard of terrible? Of course you can!

Are you ready to get started? Next post, we’ll talk specifics.