Finance Xpress

Two years ago, I was unsatisfied with my options for health insurance. The premiums were rising even as the quality dropped in the form of an ever-increasing deductible. I am guessing that you might feel the same way these days – most of us Americans are in the same boat.

I felt like I was being squeezed from both ends and it was starting to piss me off. So I decided to take some action, by doing the math for myself using a spreadsheet. I needed to answer the question, “Is this insurance really as bad a deal as I think it is?”

Sure enough, the risks and rewards of the coverage did not justify the premiums, so I decided to try an experiment and simply drop out of the market and insure myself. In other words, just rolling the dice and going through life with no form of health insurance at all.

Doubling down on the bikes, barbells and salads, I did my best to eliminate any risk factors that are in my control, while accepting that there are still much less likely but more random factors that are not.

Almost two years and $10,000 in premium savings later, I have found the experiment to be a success: I have slept well and not worried about the fact that I could be on the hook for a big bill if I did ever need major care. And as luck would have it, I also enjoyed the same good health as always over this time period – probably the best in my life so far because the extra healthy living has been working its magic.

But.

This situation has not been quite ideal, because my life is not a very useful model for everyone to follow. Most people don’t have the luck of perfect health, many have a larger family than I do, and very few people are in a financial position to self-insure for all possible medical bills.

Also, I found myself wishing I had a doctor that actually knew me, who I could call or visit on short notice if I ever did need help.

Finally, I wanted to switch back to having some form of insurance so that I could learn about it and write about it as time goes on. But was I really willing to be part of that unsatisfying and broken insurance model?

Then something magical happened: I learned about the new and vastly improved world of Direct Primary Care physicians.

What is DPC?

DPC is a fairly new trend in the US, but it is also a return to a very old tradition: a direct relationship between you and your doctor, with no insurance company in the way. 

As a customer, you pay for a monthly subscription (somewhere around $100), and in exchange you get unlimited access to super elite, personalized medicine for the vast majority of your medical needs. Diagnoses, prescriptions, skin conditions, stitches, even fixing a broken bone if you don’t need surgery. All covered, with no co-pay and in an environment that feels to me like Presidential-level health care, in striking contrast to some of my past experiences where I felt like an anonymous numbered ticket in a sloshing sea of bureaucratic institutional medicine.

Oh, and direct email, phone and text message contact with your doctor, prescriptions over phone or video call, and in some cases even house calls depending on the practice and the situation.

Through some sort of magic, the Direct Primary Care model offers much better medical care and much lower prices, at the same time.

How could it be? It’s because of the incentives.

In our famously broken US healthcare model, an insurance company is wedged in between you and your doctors, and it has different objectives than you do.

You just want the best overall health for yourself, and when the shit does hit the fan and you need medical care, you want it to be quick, effective, and at minimum cost. And you don’t want to be hounded with years of stressful stray bills after an expensive medical procedure.

Your Doctor wants to help as many people as possible and make a good living, without having to wade through a sea of paperwork or stress or lawsuits.

Your Insurance company wants to make as much profit as possible, which means maximizing the amount they collect from you, and minimizing the amount they pay to your doctor. In theory, they benefit from helping you to stay healthy. But they have also developed elaborate contracts (putting in as many loopholes as possibkelots of loopholes to allow them to drop your coverage or deny claims), become masters of delaying payments, limiting which procedures and tests they will authorize doctors to do, and just generally throwing the biggest monkey wrench into the system that they can.

Over the decades, there has been a complex battle of lawmaking, lobbying, compromise and complexity to try to regulate away some of these problems. Sometimes the new laws help, sometimes they don’t, but the end result will never be optimal simply because there are a lot of people involved, and big crowds of humans make for slow and shitty decision making.

The Direct Primary Care Model

With DPC, it’s just you and your doctor. You both have the same incentives, but now the model works much better because there is no chaotic and expensive force in the middle to mess things up.

And because you operate on a subscription, the doctor gets paid whether you come into the office or not. At the same time, you are free to come in whenever you do need something, at no additional cost. So she has an incentive to keep you healthy, so that you have no need to come into the office in the first place. 

On top of this, you get to decide together what is the best course of healthy prevention and treatment, without the overhead and complexity of constantly fighting with insurance companies. This drastically cuts the costs by eliminating the large staff of paper-pushers and attorneys that you normally need to operate a medical office, and frees up the doctor to spend more time with each patient during each visit.

How could the doctor possibly make a living with such low fees?

As it turns out, a small practice with a full-time doctor and 2-3 credentialed medical assistants can handle over 1000 subscribers while still giving each person much more time than they get under the old model. At $100 per month, this is $1.2 million in annual gross subscriber income, which is enough to pay everybody well, and rent a suitable clinic space. And as you scale up the operation, some economies of scale on things like space and equipment make it even better.

Just as importantly, running a practice like this tends to make a dramatic improvement in a doctor’s quality of life. It’s better medicine, with more flexibility and less hassle and stress. No wonder this model is growing rapidly and has become a favorite of physicians who happen to be MMM readers, as I hear from more of them every month.

Direct Primary Care is now a nationwide movement, with many hundreds of practices spanning the country and many more opening each year. Today’s screenshot of https://mapper.dpcfrontier.com/ shows the current state of the market. 

In fact, it turns out this whole trend might even be a Mustachian-originated phenomenon, as I joined my own local practice called Cloud Medical, met the founder Dr. David Tusek, and he revealed halfway through our introductory visit that he was both a founder of DPC pioneer Nextera Healthcare in 2009, and a lurking reader of this blog for several years before I discovered him right here in my own town. 

A note for locals: if you are considering joining Cloud, mention that you would like the MMM discount to save a further $12/month! (we have no affiliation, they are just looking to expand the practice and I’ll remove this notice if they fill up)

My experience (so far) with Cloud Medical

I signed up with Cloud this past summer, about five months ago. Although I have been feeling great, I figured it was time to put myself through an extensive battery of “middle-aged man” tests just to make sure I am not missing any hidden problems. 

With the doctor’s guidance, I did a very thorough blood test, plus an electrocardiogram scan of my heart performance and ultrasound Carotid artery scan which involves a practitioner lubing up your neck and sliding a Star-Trek-style probe around on it while recording images of your body’s most critical plumbing to check for signs of clogging. Plus the usual checks of an annual physical exam. All clear.

I also finally got around to a long-awaited diagnosis and prescription for my Adult Attention Deficit Disorder condition, something which took me seven years to get organized enough to achieve, paradoxically one of the crippling effects of ADD. Although this is a very personal health detail, I mention it here because there are many friends and readers who also suffer from this condition, and I encourage you to learn more about it and seek help if appropriate. It can be life-changing.  I found this process was much easier in a DPC environment, because of the more personal nature of the doctor-patient connection. 

This DPC model addresses perhaps 90% of typical medical needs in-house, and a “menu” of optional specialists knocks out another 5%. 

But there is still a chance you will need the more rare (and expensive) services of a hospital or specialist. In this case, your DPC physician can provide referrals and guidance to allow you to get the right help at a discounted, direct-pay price, or even handle your needs with a conventional insurance company.

Part Two: But What About Bigger Expenses?

At this point, you can add another layer of protection: High deductible conventional insurance, or a health share plan which offers a similar end-result while being careful not to be classified as insurance. 

These plans started out catering only to members of certain religions. Then a provider called Liberty Health Share opened up the market slightly while still requiring some fairly specific spiritual affirmations.

The latest incarnation is a company called Sedera* , which has addressed some of the shortcomings of earlier companies, has no religious basis, and now seems to be the place that most of my more analytical friends and their families are ending up. Even my DPC physician Dr. Tusek is now recommending Sedera.

Sedera is worth a whole separate article in itself, and in fact I am starting a dedicated page for questions and answers and discussion on the experience. But for now, we’ll take a shortcut and just say that I was convinced and willing to give it a try, so I signed myself up as a Sedera customer.

A quick comparison of the closest standard insurance plan I could find on the standard Colorado health insurance exchange, versus what I got from Sedera (click for larger version):

Another thing I like about all this is that there is no concept of “in network” and “out of network” doctors or hospitals. You can even use hospitals in other countries while traveling, and get reimbursed in US dollars after you return home. It’s simpler, cheaper and more flexible.

So in the end, by combining DPC with a health share plan, I am hopefully ending up with the best of all worlds:

• The best personalized, advanced medicine and quick response time, possibly anywhere in the world through my DPC subscription, with unlimited “free” (zero co-pay) doctor visits.
• Flexible coverage for any additional needs and support for decision-making and billing, even when traveling internationally
• A financial backstop just in case things get really expensive
• At a total monthly cost that is still lower than the most basic ho-hum plan on standard insurance
• A further bonus – Sedera incentivizes you to be a member of a DPC, with a solid discount if you are, because they know their costs to cover you will be lower if you are healthier and have hassle-free access to a doctor.

This all sounds good to me, but it is important to state that this is an experiment. I still don’t have much experience with the US healthcare system – it helped deliver my son in 2006, and then repair that same boy’s broken arm in 2016. Conventional insurance offered some halfhearted support for both of those expenses, but aside from that I don’t have many stories to tell. 

By collecting more information from readers and from my new helpers at Cloud Medical and Sedera, we should be able to make more sense of all this. And hopefully continue to expand and improve this new, better form of health care so it is accessible to more US residents.

If it gets big enough, we might end up solving this whole problem together – better, cheaper health care for everyone.

My past articles and experiences have shown that for many of us, a big hurdle when considering early retirement or self-employment is “what about health insurance”? Hopefully the is DPC + Healthshare method will put that question to rest for many of us. After all, shouldn’t our career and life choices be separate from our healthcare?

—–

Interested in Learning More?

A long-time friend of mine (and fellow early-retiree, and co-owner of the HQ coworking space) Bill and his family have been Sedera customers and enthusiasts for about two years. So much that he even took it upon himself to meet the company’s management, sign himself up as a representative to streamline some of the inefficiencies he perceived when joining, and then teach me about the whole thing.

Because of that, I am sharing Bill’s Sedera signup link in this article. His is unique among the Sedera affiliates in that he charges zero administrative fee, typical brokers charge $25 per month and up.

https:/sedera.community/thefireguild1

*note: Sedera does pay its affiliates a small referral fee for new customers, which does not affect your monthly bill – in fact, this link offers a lower price than subscribing directly through the company’s website. Thus, we believe this is the lowest cost way on the Internet to get this coverage.

As mentioned above, I’m giving Bill his own page to maintain on this site, where he can share his ongoing research and updates and answer questions: mrmoneymustache.com/sedera

Further Reading:

I was quite moved by this piece that Cloud Medical’s Dr. David Tusek wrote about “the ten heartbreaks” that led him to work since 2009 towards accelerating this better way to do healthcare.

An interesting story from Bill’s hometown, from a doctor who took this path way back in 2013:

South Portland Doctor Stops Accepting Insurance, Posts Prices Online
(from the Bangor Daily News)

Way back in the olden days, people used to be amazed at my life story. I was
“The Man Who Retired at 30”, and it was so unusual that it would show up in news headlines all over the place. 

Thankfully, this is no longer such a surprising story. The idea of financial independence has spread far and wide with the rise of the FIRE movement, and people now realize it’s not such a big deal after all. And in fact, people are doing more innovative things than I did, and getting themselves to financial independence in less time.

My story was a nine-year working career, and retirement at 30. This was achieved by earning an engineer’s salary, not spending all of it, and investing the surplus in very standard index funds and fixing up my own house.

Today we will to learn about a guy who did it in about three years, and is now financially free at age 27. And this was accomplished on a lower salary, without the cooperation of the badass and high-earning partner that helped me, and without my own honey badger dedication to bike transportation and DIY home renovation.

His secret was simply buying houses in an area with solid demand and renting them out. But with an interesting twist: by partitioning larger houses into smaller, more affordable units, he was able to make a small initial investment go much further, and grow much more quickly.

This is an age-old business model, but it has come back in a newer, better form and today it sometimes goes by the name House Hacking. And my goal with this article is to get you to consider the practice, because it is often the highest hourly wage and most flexible job you can possibly create for yourself. And, if you do it right, you are improving your city by providing a useful service, making housing more affordable and increasing density in a place where it is needed.

What is House Hacking?

At its most basic level, this is just a trendy name for “renting out part of your house as an apartment.” You can go further and add layers of complexity (and profit), for example moving yourself into that apartment and renting out the bigger part of your house, a move which I call the “Mustachian Inversion.” Or go even further and live in a tinyhouse in your own back yard. But at the core, we are still talking about renting aparments. 

While it may sound a bit daunting and/or inconvenient if you’ve never done it, the reality is that becoming a landlord is usually surprisingly easy, and also ridiculously profitable. Seriously – almost every one of my friends these days has some form of rental property, and is financially independent. And these two life conditions are usually related.

So if you currently live somewhere with extra space – or if you plan to shop for a house at any point in your future – and you have any use at all for more money, you should consider it seriously.

There are two fundamental reasons that house hacking works so well:

1 ) Rents are Non-linear. Or in plainer English, people pay a lot for their first bedroom, bathroom and kitchen. But they only pay a little bit more for each additional bedroom. So as the homeowner you can sacrifice just a little bit of your space, but get a larger portion of the rent that you would have collected from renting out your entire house. 

2) Borrowed Money is Ridiculously Cheap. We are living in unprecedented times, where banks are willing to lend out huge amounts of money at just about zero cost after you adjust for inflation. This effectively makes houses cheaper to own, because you lock in the purchase price today, but pay it off super slowly with dollars that are worth a bit less with each passing year.

With those big puzzle pieces in hand, let’s put the rubber to the road with a real-world example.

In fact I can use myself as a case study because I currently own a house all to myself, with a bit more space than I need. 

First of all, wow, isn’t it amazing that you can own a $390,000 house for only a thousand bucks a month of actual cash outlay? That’s the cheap money at work. 

But that’s just the beginning of the amazement. Because my house happens to be in a row of townhouse-like identical detached houses located along the side of a small hill. The fronts of these houses have a few steps down to the sidewalk, and street parking. The backs of the houses are accessed by an alley, where we each have a two car driveway, two-car garage, and a ground-level entrance which leads to the sorta-walk-out basement. 

This setup is just ripe for creating a separate apartment, and indeed several of my neighbors have already done so. So what if I did it myself?

Scanning Craigsist and Zillow for smallish 1BR apartments in the better neighborhoods, I am surprised to see them in the $800-$1000 range. Especially with off-street parking and the fact that my house backs onto the main bike path and a beautiful greenway with a mountain stream running through it, I feel confident that I could be within this range so let’s say $900.

So where does this leave us?

Wow! So even in this very beginner situation, I cut my housing costs by 83% and increase my wealth by $150,000. Just by giving up a portion of my spare living space and putting up a Craigslist ad. 

I wonder what would happen if we took this even further?

Meet Craig Curelop

Craig started with this strategy in a small way, but scaled it up rapidly. It went roughly like this:

2017: bought a house in a less-than-pristine but very central Denver neighborhood for $385,000 (with only $17k down). Lived there in one small room partition, rented out part as an apartment, and rented out the rest as an Airbnb.

Rental Income: $2850/month (plus free rent he values conservatively at $400)
Costs: About $2250 including expenses
Net cashflow benefit: $1000/month = $12,000 per year.
(including principal payoff, this is over a 100% return on that initial $17k downpayment!)

So at the end of year one, Curelop’s portfolio looked like this:

2018: Bought a second house for $343,000 ($27k down including some upgrades). Then immediately rented it out by the room for a total of $3100 per month. Carved out a little space for himself, and moved in. Raised the rent on the previous unit since he wasn’t living there any more. The end result was this:

2019: With so much passive income already rolling in, Craig continued to save vigorously and bought another house for $380,000, this time with a 5% downpayment ($19k) plus $32k in repairs and other costs to make it a nice two-unit rental. This brought him to this situation:

And BOOM – at this point Craig was already set for life.

$4150 per month is more than enough to live on, which means he never has to work again – unless he chooses to do so. This happens to be my personal definition of “retirement”, because the old definition of ceasing to work is obsolete. Work is better when you don’t need the money.

And it gets even better. The $4150 number is before taking into account the fact that about $2000 of principal is being automatically paid off on these three loans per month, or that they are appreciating in value at an expected $3000 per month based on expected inflation alone. And thanks to US tax laws regarding property depreciation, a large portion of this cashflow arrives completely tax-free.

And as luck would have it, the Denver real estate market has gone up much faster than inflation in recent years, boosting his net worth by an additional $100,000+.

All of this wealth has been exploded out of an initial cash outlay of only about $100,000. With this amount invested in index funds, the 4% rule would suggest you rely on only about $4000 per year of passive income. Craig is getting about ten times higher returns, in exchange for some good brainpower, a moderate amount of work and some risk – all multiplied by the magical power of massive leverage with money from banks.

Because Craig has been so aggressive and efficient, it can seem a bit intimidating to hear his story. And in fact, I’m hesitant to even mention that in 2020 he has gone even further and bought seven additional homes, just because he is on a roll and enjoying the game (for now).

Oh, and while most wealthy people go out shopping for mountain houses, Craig is going the opposite way at the moment – experimenting with Van Life, having bought a nicely converted vehicle which is currently parked in the back yard of our HQ coworking space.

But fear not. You absolutely don’t have to go to these extremes in order to become financially independent. Because all you need is enough money, so that you no longer have to think about the stuff. House hacking is simply a very powerful tool to get you there much faster.

So if you do have a use for more money, you should definitely keep this in mind. Even the slightest bit of dabbling like renting out a basement or making sure your next house has a suitable rental space, can cut years off of your mandatory work career, and bring in an income equivalent to hundreds or thousands of dollars per hour that you to put into it.

It’s well worth the hassle, and you just might discover that you love it.

In the Comments: Have you tried house hacking or at least rental real estate? How has it been working out for you?

Do you have a question for Craig specifically? Feel free to ask him here, and I’ll invite him to participate in the discussion. You can also find him at his own website, where he has built a small team for continued real estate deals and other fun, at https://www.thefiteam.com/

Temporary Opportunity just to help a friend: If you are Colorado Curious, you should move here and rent my friends Mike and Kim’s house. It’s an awesome place in the best possible location!

* Indicates an affiliate link – MMM may earn a commission if you decide that Credible’s Mortgage rates or Student Loan Refi Rates are the best for you, see affiliates policy.

Since the Dawn of Mustachianism in 2011, the same question has come up over and over again:

And in these nine years since then, the movement towards socially responsible investing has only grown. Public pension funds have started to “divest” from oil company stocks, and various social issues like human rights, child labor, climate change or corporate corruption have bubbled to the surface at different times.

And all of this has led to the exploding new field of Socially Responsible Investing (SRI), and a growing array of new ways to do it.

So it seems that this is not just a passing trend – people just might be starting to care a bit more. And since capitalism is just an expression of human behavior, the nature of capitalism itself may be starting to change.

This leads us naturally to the question:

What can I do with my money to help fix the world? And even better, is there a way I can make money in the process of fixing it?

The answer is a good, solid “Probably.”

As long as you don’t get too hung up on getting every last detail perfect, because just like real life, investing is a haphazard and approximate and unpredictable thing. But by understanding the big picture, you can make slightly better decisions on average, which lead to slightly better results. And slightly better results, stacked up consistently over time, can lead to a much better life, or even a much better world.

This is true in all of the main areas we care about – personal wealth, fitness and health, even relationships and happiness. And while your money and investments are certainly not the most important thing in life, they are still worthy of a bit of easy and effective optimization.

So anyway, the first thing to understand with SRI is, “what problem am I trying to solve?”

The answer is, “You are trying to make your investing (especially index fund investing) have a better impact on the world.”

On its own, index fund investing is ridiculously simple. You just get an account at any brokerage like Vanguard, Etrade, Schwab or whatever, and dump all your money into one exchange-traded fund: VTI.

When you do this, you are buying a stake in 3500 companies at once(!), which is both impressive and overwhelming. How do you even know what you are holding?

Well, this is all public information, and easily available with a quick Google search. For example, here’s a list of the top 90 holdings in VTI (click for larger):

As you can see, the biggest chunk of money is allocated to today’s tech darlings, because this index fund is weighted according to market value, and these are the most valuable companies in the US today.

Through a convenient coincidence, the total value of the VTI fund happens to be just under $1 trillion dollars, which means you can just throw a decimal point after the ten billions digit of market value to get a percentage. In other words, about 4.7% of your money will go towards Apple stock, 4.4 towards Microsoft, and so on. Together, these top 90 companies are worth more than the remaining 3,540 companies combined, so these are what really drive your retirement account.

And within this list, you will see some of the usual suspects: Exxon and Chevron (oil), Philip Morris (tobacco), Raytheon and Lockheed (bombs), and so on.

But what about the less-usual suspects? For example, I happen to think that sugar, and especially sugar-packed beverages like Coke, is the biggest killer in the developed world – a major contributor to 2 million of the 2.8 million deaths each year in the US alone. Should I exclude that from my portfolio too?

And what about drug and insurance companies – aren’t they behind the political stalemate and high costs of the US healthcare system? Comcast funded some election disinformation campaigns here in my home town in the early 2010s, should I exclude them too? And if you’re part of a religion that is against charging interest on loans, or in favor of pasta and Pirate costumes, or against a spherical Earth, or any number of additional ornate rules, you may have still more preferences.

The higher your desire for perfection, the more difficult this exercise will become. However, if you are like me and you just want to get most of the desired result with minimal effort, you might simply have a look at the Vanguard fund called ESGV.

ESG stands for “Environmental, Social and Governance”, and in practice it just means “We have tried to avoid some of the shittier companies according to some fairly simple rules.”

And the result is this:

The first thing you’ll notice is that it’s almost the same. In fact, the top five holdings – Apple, Microsoft, Amazon, Facebook, Alphabet (Google) and Netflix not far behind, collectively referred to as the FAANG stocks – are completely unchanged – and this means that there will be plenty of correlation between these funds.

It’s also the reason that the stock market as a whole has recovered so quickly from this COVID-era recession: small businesses like restaurants and hair salons have been destroyed by the shutdowns, but big companies that benefit from people staying at home and using computers and phones are making more money than ever. The stock market isn’t the whole economy, it’s just the publicly traded companies, which are the big ones.

But let’s look at the biggest differences between the normal index fund versus the social version.

The following large companies listed on the left are missing in the ESGV fund, in order of size. And to make up the difference, the stake in the companies on the right have been boosted up to take their place in your portfolio.

The omission of Berkshire Hathaway was a bit of a shocker, as it is run with solid ethical principles by Warren Buffet, one of the worlds most generous philanthropists. And in fact the modern day nerd-saint Bill Gates is on the Berkshire board of directors, another person whose work I follow and respect greatly.

(side note: Apparently the company fails on the “independent governance” category. And Buffet disputes this category, but in his characteristic way has decided to say, “Fuck it, I’ma just keep doing my own thing with my half-trillion dollar empire over here and you can have fun with your little committee” – I’m paraphrasing a bit but he totally did say that.)

Furthermore, both funds hold the factory meat king Tyson foods, while neither holds Roundup-happy Monsanto, because it was bought by the German conglomerate Bayer AG a while back. Nextera is a giant electric utility in the Southeastern US that claims to be the world’s largest generator of renewable energy. Some do-gooders are against nuclear power, while others (including me) think it’s the Bee’s Knees and we should keep advancing it. And all this just goes to show how nobody will agree 100% on what makes a good socially responsible fund.

But What About The Performance?

In the past, some investors were nervous about giving up oil companies in their portfolio, because while it was a dirty substance, it was also what made the world go round – which meant it was a cash cow.

Now, however, oil is on its way out as renewable energy and battery storage have crossed the cost parity threshold – meaning it’s cheaper to make power (and vehicles) that don’t use oil. In its place, technology is the new cash cow, and tech is heavily represented in the ESG funds. The result:

As you can see, the performance has been similar but the ESG fund has done significantly better in the (admittedly short) time since it was introduced at Vanguard.

Of course, we have no idea if this will continue, but the point is that at least our thesis is not a ridiculous one – environmentally sustainable companies do have an advantage, if the world gradually starts to care more about these things. And if you look at the share price of Tesla and other companies that surround it in electric transportation and energy storage, you will see that there are many trillions of dollars already lining up to benefit from this transition. And the very presence of so much investment money creates a self-fulfilling prophecy, as Tesla is now building or expanding five of the world’s largest factories on three continents simultaneously.

So What Should You Do? (and what I do myself)

First of all, it helps to remember a fundamental piece of economics: your spending dollars will probably have a much bigger impact than your investment dollars. This is because you are sending a direct message to the world rather than an indirect one:

When you buy a new gasoline-powered Subaru (or a tank of gas for your existing guzzler) or a steak at the grocery store, or a plane ticket, you are telling those company directly that consumers want more of these products, so they will produce more of them immediately.

When you buy shares in Exxon, you are only subtly raising the demand for those shares, which raises the average price, making it ever-so-slightly easier for Exxon to maybe issue more shares in the future. In other words, you are making it easier for them to access capital. But capital is only useful if there is demand for their products. And with oil there is a nearly constant surplus, which is why OPEC and other cartels need to work together to artificially restrict supply, just to keep prices up.

Plus, as a shareholder you are theoretically eligible to place votes and influence the future direction of companies – even companies that you don’t like. If you look up the field of “shareholder activism”, you’ll see this is a tradition that goes way back.

So I have tried to take a few simple steps on the consumer side myself, and I find it quite satisfying: Insulating the shit out of all of my properties, building a DIY solar electric array on one of them, and buying one electric car so far to eliminate local gas burning. And a few electric bikes including a super fast one I made myself.

Each one of these steps has provided a very high economic return, percentage-wise, but that still leaves a lot of money to account for, which brings us back to stock investing.

As someone who loves simplicity, I have done this:

• Bought almost entirely VTI (or similar Vanguard funds) from 2000-2015
• Started experimenting with Betterment in 2015, liked it, and have been adding a percentage of my ongoing savings to that account to that since then. (Note that Betterment now also offers a socially responsible portfolio option.)
• Switched the dividend re-investing of my old Vanguard VTI over to Vanguard ESGV, to avoid “wash sales” in making the most of Betterment’s tax loss harvesting feature.
• Bought some shares of Berkshire Hathaway separately, and also make a few sentimental investments in local businesses, including the MMM HQ Coworking space.

But you could choose to be more hardcore in your ESG/SRI investing:

• Buy your own basket of stocks based on the index, but with different weighting based on your own values
• Spend more money on other things that generate or save money (a bigger solar array on your house, better insulation, electric car, an ebike to reduce car trips, etc.)
• Invest in local businesses of your choice, rental real estate, community solar projects, or other things which generate passive income – publicly traded stocks are just one of many ways to fund an early retirement!

Like most areas of life, investing is not something you have to do perfectly in order to succeed – even socially responsible investing. If you apply the 80/20 rule to get the big picture right, you have probably found the Sweet Spot and you can move on to the next area of life to optimize.

In the Comments:
What is your own investment strategy? Have you thought at all about this ESG / SRI stuff? Did this article bring anything new to the table?

“Success can get you to the top of a beautiful cliff,

but then propel you right over the edge of it.”

As a Mustachian, there’s a good chance that you are a bit of an overachiever. 

Maybe you fought hard to get exceptional grades in school, or perhaps you have always dominated in your career or your Ultramarathon habit or your hobbies – or maybe all of the above. 

In the big picture, this usually leads to having a “successful” life, because of this basic math:

Traditional Success
 =
How much work you do
x
How much society happens to value your work

The Nitty Gritty of Traditional Success

Now, lest the Internet Privilege Police head straight to Twitter to start writing out citations, Traditional Success is not a measure of your worthiness as a human being. We’re just talking about the old-fashioned, Smiling 1950s Man definition of success.

 And since we’re all scientists here, we could break the “Work” side of it down a bit further:

And thus, you could say that on average, doing more stuff produces more traditional success. 

But then what?

This is the point where a lot of  smart, driven, born-lucky people drive themselves up the Winding Road of Challenge and then right off the edge of the Cliff of Success. 

If you’re still on the way up, or stuck at the bottom, it is difficult to even imagine the idea of “too much success”. But it’s a real thing, and it happens much more quickly than the modern overachiever would like to admit. Observe the following cautionary tale:

Diana is the director of engineering in a Silicon Valley tech startup. The work is intense, but they are almost over the hump – the company went public last month, and she owns shares that are worth over $10 million at today’s share price. They will vest over the next five years, so she just needs to grind this out and then she will be set for life.

Sounds great, right?

Except this is Diana’s third smashing success. She was already set for life after the second company was acquired, and even before that, her first decade as a rising star at a large company had already left her with over $2 million of investments and a paid-off house in hella expensive Cupertino, California. She had more than enough to retire, twenty years ago!

To many people who are less fortunate, the present situation would still sound like great fortune, and in some ways, it is. Becoming a Director of Engineering is (usually) far better than a punch in the face.

But Diana is now 52 years old, with a collection of increasingly severe back and neck problems and a few medical prescriptions piling up. She has two grown children in their twenties, but wishes she had been able to spend more time with them as they grew up. She has all the money in the world, but still almost no free time, and this next five years is starting to look like an eternity.

What happened here?

Diana is in good company, because many of our hardest-working people fall into this same trap. They have the talent and the great work habits figured out, but they are still missing one last concept – the idea of the sweet spot.

Fig. 1: What is the ideal length of a high-end career?

Diana could have stopped after the first company, or the second, but her career success took on a momentum of its own, so she kept doubling down without stopping to consider why she was doing it – and what she was giving up in exchange.

Once you learn to see the phenomenon of the sweet spot, you will start noticing it everywhere. And it is an amazingly useful thing to start watching and fine-tuning to get the most out of your own life.

Fig.2: What is the ideal amount of Anything?

The Sweet Spot of Physical Training

When a non-runner starts running, they will see immediate benefits. In the process of going from being unable to jog across a parking lot, to being able to easily jog a brisk mile, your entire body will transform for the better. Muscles and bones get stronger, heart and lungs expand and reach out to give your body a healthy embrace, brain functioning and mood and hormones smooth out and normalize. 

Training your way up to become a two mile runner still brings great benefits – just slightly smaller. The fifth through twentieth mile turn you into a hyper efficient machine, but some people start seeing joint injuries as they rise through the ranks.

And by the time you reach the fringe world of 100-mile runners, serious injuries and surgeries are completely normal – as well as unexpected organ failures in otherwise young, healthy people. The sweet spot for daily running for maximum health is somewhere the middle.

All around us, seemingly unrelated things follow this same pattern, from career work to physical exertion to parenting strategy.

Fame and Fortune – be careful what you wish for

Fame definitely has a sweet spot. Building up a good reputation in your community can open the door to better friendships, jobs, relationships, and more fun in general.

But as that reputation expands outwards to become fame, you get the “reward” of constant coverage in gossip magazines and waking up to find photographers and news reporters on your front lawn. At the extreme end, you need to mobilize a team of armored vehicles and line your route with snipers every time you leave your well-guarded compound.

Even money, our humble and ever-willing servant is subject to this phenomenon. It certainly helps us meet our basic needs, but there is a certain point at which Mo Money can become Mo Problems. 

The first bit of monetary surplus can be fun as you can afford a nice house and good food. Then the next chunk seems fun but also causes distractions as you rack up second and third houses and ever-more elaborate possessions and vacations that take a lot of energy to keep track of.

And from there it goes downhill as tabloids start keeping track of your wealth and scrutinizing your choices, hundreds of people mail in pleas for your generosity, and you end up with a full-time job just making sure that the surplus goes to good use. This life arrangement can still be enjoyable for some people, but I would definitely not wish it upon myself.

On and on this pattern goes. A curve with a sweet spot in the middle. The optimal amount of calories to consume in a day. The volume at which you will enjoy your music most. The right brightness of light to illuminate a room. The number of friends with whom you can have a meaningful relationship.

 Why does it occur in so many places? I believe it is because this is how our brains are wired in the first place. 

Humans are a ridiculously adaptable creature, but we do still come with limits.

And when you respect those limits and fine-tune your life within the sweet spot for all of the main pillars for happy living, you end up with the best possible chance at living a happy, prosperous life.

The Curse Of the Overachievers – Revisited

So now you see the problem – overachievers like us tend to get really good at a few things like a career or an athletic pursuit often specializing so much that we neglect other things like overall health or personal relationships.

And our society notices and rewards us for the success, which just reinforces the behavior, so we take things to even higher extremes, often without stopping to think about the reason behind it.

Okay, So What Now?

Once you see the pattern of the sweet spot,  it is impossible to un-see it. So it becomes pretty easy to float up and look at your entire life from above, like an outside observer.

And from up there, you can see the areas where you have enough, and places where you may have already gone overboard, and the corresponding things that you have left neglected as the price of that success. 

Over the past year I’ve been looking at my own life from this perspective, coming up with quite a few of my own diagnoses:

Money: enough. Additional windfalls don’t seem to bring me any lasting joy, but I also don’t have so much money that it makes me nervous. It’s enough to feel safe and empowered, and that’s all I need. Meanwhile, giving away money has brought me lasting happiness, without creating a feeling of shortage or regret.

Career Success (blog): It Varies. When I was really working on this MMM job in the mid-2010s, it started to take over too much of my life. Emails, opportunities, travel and public attention all reached levels where I actually started to have less fun. So I tried dialing it back, as any long-term readers will have noticed. And sure enough, life improved. But then I went too far and started feeling a loss from letting this valued hobby slip away. I’ve been trying to get back into the groove, which revealed another problem – detailed at the end of this list.

Friendships: Not Enough. I have found myself not being able to keep up with close friends, and had difficulty making or keeping plans, partly out of  feeling overwhelmed with life details in general. Still, the opportunities abound here in my local community, and the people are wonderful. So I have the opportunity to keep working at this.

Health and Fitness: Enough. Since I was about fourteen years old, eating well and getting a lot of varied exercise has always been a kind of non-negotiable pillar for me. Nothing extreme, but just very consistent. I think this has been paying off as I feel healthy every day and have never had any physical or health problems in these 30+ years since.

Parenting and Kids: Enough (an A+!) Since 2005 I made “being a Dad” my primary goal in life, quitting my career to do so. It’s the only thing I can truly say I have done the best I could at, and I’m really proud of that. But part of this success came from only having one kid – both of us parents knew we couldn’t handle any more, given the overall conditions of life back then. So for us, the sweet spot was One Child – and absolutely no regrets in that department.

Personal Projects and Daily Habits: Not Enough. I get great satisfaction from working on challenging things and making progress. But far too often, I just can’t get it together and I squander entire days on accidental distractions. Planning to go out for a day of work can lead to searching for lost sunglasses which can lead to finding a lost to-do list which can lead to opening the computer to look something up and several hours disappearing. On and on these tangents can go, often leading to me not getting my primary, happiness-creating goals for the day accomplished. 

I discovered that I have a pretty severe and textbook case of Adult Attention Deficit Disorder, which gets magnified if there are any sources of stress in my life. So I’m working on that (keeping stress down and also targeting habits, diet, exercise and even trying some medication), which will hopefully improve all other areas of life as well.

What am I missing? I’m still working on thinking it all through, so this list will surely grow.

Your Turn

Your life surely has a completely different array of surpluses, shortages and sweet spots than mine. Your assignment is therefore to write them all out tonight, and see where you stand in each area, and decide what to change. Many of the changes are quite easy to make, and yet the results are nothing short of life-changing.

In the comments: what are your own areas of surplus and shortage? And what’s your plan to help restore balance to your life?

A Quick Foreword: Although the world is still in Pandemic mode, we are shifting gears back to personal finance mode here at MMM. Partly because we could all use a distraction right now, and even more important because forced time off like this is the ideal time to re-invest in optimizing parts of your life such as your fitness, food and finances.

—

Every now and then, I learn to my horror that some people are still paying preposterous amounts for mobile phone service, so I write another article about it.

If we are lucky, a solid number of people make the switch and enjoy increased prosperity, but everyone who didn’t happen to read that article goes on paying and paying, and I see it in the case studies that people email me when looking for advice. Lines like this in their budget:

• mobile phone service (2 people): $160

“NO!!!!”
… is all I can say, when I see such unnecessary expenditure. These days, a great nationwide phone service plan costs between and $10-40 per month, depending on how many frills you need.

Why is this a big deal? Just because of this simple fact:

• Cutting $100 per month from your budget becomes a $17,000 boost to your wealth every ten years.

And today’s $10-40 phone plans are just great. Anything more than that is just a plain old ripoff, end of story. Just as any phone more expensive than $200* (yes, that includes all new iPhones), is probably a waste of money too.

So today, we are going to take the next step: assigning a permanent inner-circle Mustachian expert to monitor the ever-improving cell phone market, and dispense the latest advice as appropriate. And I happen to know just the guy:

My first contact with Chris was in 2016 when he was working with GiveWell, a super-efficient charitable organization that often tops the list for people looking to maximize the impact of their giving.

But much to my surprise, he showed up in my own HQ coworking space in 2018, and I noticed he was a bit of a mobile phone research addict. He had started an intriguing website called Coverage Critic, and started methodically reviewing every phone plan (and even many handsets) he could get his hands on, and I liked the thorough and open way in which he did it.

This was ideal for me, because frankly I don’t have time to keep pace with ongoing changes in the marketplace. I may be an expert on construction and energy consumption, but I defer to my friend Ben when I have questions about fixing cars, Brandon when I need advice on credit cards, HQ member Dr. D for insider perspectives on the life of a doctor and the medical industry, and now Chris can take on the mobile phone world.

So we decided to team up: Chris will maintain his own list of the best cheap mobile phone plans on a new Coverage Critic page here on MMM. He gets the benefit of more people enjoying his work, and I get the benefit of more useful information on my site. And if it goes well, it will generate savings for you and eventual referral income for us (more on that at the bottom of this article).

So to complete this introduction, I will hand the keyboard over to the man himself.

Meet The Coverage Critic

I started my professional life working on cost-effectiveness models for the charity evaluator GiveWell. (The organization is awesome; see MMM’s earlier post.) When I was ready for a career change, I figured I’d like to combine my analytical nature with my knack for cutting through bullshit. That quickly led me to the cell phone industry.

So about a year ago, I created a site called Coverage Critic in the hopes of meeting a need that was being overlooked: detailed mobile phone service reviews, without the common problem of bias due to undisclosed financial arrangements between the phone company and the reviewer.

What’s the Problem with the Cell Phone Industry?

Somehow, every mobile phone network in the U.S. claims to offer the best service. And each network can back up its claims by referencing third-party evaluations. 

How is that possible? Bad financial incentives.

Each network wants to claim it is great. Network operators are willing to pay to license reviewers’ “awards”. Consequently, money-hungry reviewers give awards to undeserving, mediocre networks.

On top of this, many phone companies have whipped up combinations of confusing plans, convoluted prices, and misleading claims. Just a few examples:

• Coverage maps continue to be wildly inaccurate.
• Many carriers offer “unlimited” plans that have limits.
• All of the major U.S. network operators are overhyping next-generation, 5G technologies. AT&T has even started tricking its subscribers by renaming some of its 4G service “5GE.”

However, with enough research and shoveling, I believe it becomes clear which phone companies and plans offer the best bang for the buck.  So going forward, MMM and I will be collaborating to share recommended phone plans right here on his website, and adding an automated plan finder tool soon afterwards. I think you’ll find that there are a lot of great, budget-friendly options on the market.

A Few Quick Examples:

T-Mobile Connect: unlimited minutes and texts with 2GB of data for $15 per month

Total Wireless: 4 lines in a combined family plan with unlimited calling, texting, and 100GB of shared data(!) for $100 per month. (runs on Verizon’s extensive network)

Xfinity Mobile: 5 lines with unlimited minutes, unlimited texts, and 10GB of shared data over Verizon’s network for about $12 per line each month (heads up: only Xfinity Internet customers are eligible, and the bring-your-own-device program is fairly restrictive).

Ting: Limited use family plans for under $15 per line each month.

Tello: 100 minutes, unlimited texts, and 1GB of data for $7 per month (on Sprint’s somewhat lousy network).

[MMM note – even as a frequent traveler, serious techie and a “professional blogger”, I rarely use more than 1GB each month on my own Google Fi plan ($20 base cost plus data, then $15 for each additional family member). So some of these are indeed generous plans]

Okay, What About Phones?

With the above carriers, you may be able to bring your existing phone. But if you need a new one, there are some damn good, low-cost options these days. The Moto G7 Play is only $130 and offers outstanding performance despite the low price point. I use it as my personal phone and love it.

If you really want something fancy, consider the Google Pixel 3a or the recently released, second-generation iPhone SE. Both of these are amazing phones and about half as expensive as an iPhone 11.

——————————————-

Mobile Phone Service 101

If you’re looking to save on cell phone service, it’s helpful to have a basic understanding of the industry. For the sake of brevity, I’m going to skip over a lot of nuances in the rest of this post. If you’re a nerd like me and want more technical details, check out my longer, drier article that goes into more depth.

The Wireless Market

There are only four nationwide networks in the U.S. (soon to be three thanks to a merger between T-Mobile and Sprint). They vary in the extent of their coverage:

• Verizon (most coverage)
• AT&T (2nd best coverage)
• T-Mobile (3rd best coverage)
• Sprint (worst coverage)

Not everyone needs the most  coverage. All four nationwide networks typically offer solid coverage in densely populated areas. Coverage should be a bigger concern for people who regularly find themselves deep in the mountains or cornfields.

While there are only four nationwide networks, there are dozens of carriers offering cell phone service to consumers – offering vastly different pricing and customer service experiences.

Expensive services running over a given network will tend to offer better customer service, more roaming coverage, and better priority during periods of congestion than low-cost carriers using the same network. That said, many people won’t even notice a difference between low-cost and high-cost carriers using the same network.

 For most people, the easiest way to figure out whether a low-cost carrier will provide a good experience is to just try one. You can typically sign up for these services without a long-term commitment. If you have a good initial experience with a budget-friendly carrier, you can stick with it and save substantially month after month.

With a good carrier, a budget-friendly phone, and a bit of effort to limit data use, most people can have a great cellular experience while saving a bunch of money.

MMM’s Conclusion

From now on, you can check in on the Coverage Critic’s recommendations at mrmoneymustache.com/coveragecritic, and he will also be issuing occasional clever or wry commentary on Twitter at @Coverage_Critic.

Thanks for joining the team, Chris!

*okay, special exception if you use it for work in video or photography. I paid $299 a year ago for my stupendously fancy Google Pixel 3a phone.. but only because I run this blog and the extra spending is justified by the better camera.

The Full Disclosure: whenever possible, we have signed this blog up for referral programs with any recommended companies that offer them, so we may receive a commission if you sign up for a plan using our research. We aim to avoid letting income (or lack thereof) affect our recommendations, but we still want to be upfront about everything so you can judge for yourself. Specific details about these referral programs is shared on the CC transparency page. MMM explains more about how he handles affiliate arrangements here.