Evaluating a New Expense: Laundry

Within this blog and the overall personal finance space, expenses are largely viewed within the lens of minimizing and managing them. And that’s for good reason as we will see. However, in this post, I want to spend some time evaluating a new expense that Selenid and I just added in our lives. And how it has so far had a very positive effect.

So this should be different and fun!

Why expenses matter to begin with

Back when I started my financial comeback story, I had no concept of how to build wealth, improve my financial well-being, and ultimately start on the path to financial freedom.

Since then, I’ve learned a lot about personal finance and worked hard to boil down a universal equation to achieve FIRE. That formula is here.

However, we can break it down into even simpler component parts, I believe

Very simply, to build wealth you need to increase and invest the margin between what you earn and what you spend.

Strategies to invest the margin between what you earn and what you spend comprise a large portion of this blog. But that is not what we are discussing here.

Here, we are focusing on the step before investing your margin…which is creating a margin to begin with. To do that, you create a gap between what you earn and what you spend (your expenses). And there are two ways to do this:

• Increase your income, or
• Decrease your expenses

And while your income is always somewhat in your control (via improving clinical compensation or developing alternative streams of income through side gigs like these), your expenses are always (at every time of your life!) 100% in your control.

Thus, managing and minimizing your expenses becomes the most direct way to start building wealth!

How much do you need to minimize your expenses and how do you do that?

These are the logical next questions that I get asked after explaining this concept of mine.

And the answers are actually pretty straightforward.

First, an excellent rule of thumb is to save at least 20% of your pre-tax AKA gross income. Therefore, as an example, if you make $100,000 annually pre-tax, save $20,000. As a physician (of any kind), if you do this and invest those savings in broadly diversified, low cost index funds, you will reach financial freedom.

Second, as to the how of creating this margin or savings rate, the tool that will help you accomplish this is a budget. I’ll spare you my whole monologue on why budgeting is so important and why even doctors and high income earners need to do it. Because you can find that monologue as well as a free budgeting template if you need one right here.

So why are we talking about adding and evaluating new expenses then?!

It’s a fair question.

If managing and minimizing expenses is so central and key to creating wealth, why would be focus of adding new expenses?

Well, that’s because, once we create and institute our savings rate of at least 20% and then invest it, anything else left over can be put to use in 2 ways:

• Saving and investing more to accelerate your path to financial freedom, or
• Spending it

And I think it is a flaw in the physician finance space that the “spending it” option is not discussed more. Myself included. In fact, I even somewhat recently poo-poo’ed the whole die with zero philosophy for physicians.

But, once you create the foundation of your financial well-being and are on your path to financial freedom, spending is not (all) bad. In fact, much of it can be good. So long as it brings you, your loved one, and/or the world at large a commiserate amount of joy.

That’s actually the whole concept of intentional spending.

So, let’s shed some light on this topic by evaluating a new expense that Selenid and I just added to our lives…

Evaluating a new expense: laundry!

About 2 months ago, Selenid and I sat together after the kids were down for bed. We were feeling overrun with life. Just in general it seemed like we never had a moment and we were tired.

So, we planned to have a conversation about why we felt like this and what we could do to improve it.

A big part of that conversation was identifying things in our everyday lives that we were spending at outsized amount of time on that did not bring us joy. And at the top of that list…laundry.

We truly always hated doing laundry

We would procrastinate doing every step. Dirty clothes accumulated until last minute we needed to do laundry lest we not have an outfit for ourselves or the kids. Then we would do it and dreaded folding it. So the clean clothes sat in hamper while every day we would drudge through it looking of matching pajamas or socks for us or the kids.

I think part of our disdain comes from our time in NYC. There, we had to bring the laundry down 10 stories to a small laundry room and fight over washers and dryers. It was an ever more miserable affair.

But either way, we hated doing laundry, it took a lot of time, and it stressed us out.

So, we decided to outsource it. And that meant a new expense

After some research, Selenid found a local, woman owned company called Snappy Cleaning.

She spoke with the owner and read reviews which were overwhelmingly positive. Their service works like this:

• Every Sunday and Wednesday, they text you to see if you need laundry done.
• If you indicate you do, they come the next day to pick up the laundry in special bags that they provide you.
• The next Thursday or Monday, they return the clothes washed, folded, and sorted.
• If you need dry cleaning, they do that too.

Now let’s actually look at the expenses we’ve incurred since starting

I honestly am not even sure of the pricing in terms of cost per pound of laundry. But absolute costs are more instructive in evaluating a new expense like this in my opinion.

We started using these services about 2 months ago.

And we’ve used them 4 times so far. The costs per use were:

• $269
• $91
• $88
• $86

That totals up for $534 or $267/month. And remember this is a new expense in our budget. So this amount comes straight out of our “would otherwise be investing or spending” pile.

And before we even evaluate further, I do want to address why the first load cost so much more than the others. This is because Selenid is extremely paranoid that if her sweaters get dried, they will be ruined. I’m not sure how much this is based in reality since I dry all of my sweaters. But anyway, she told this to the service and they very graciously and expensively dry cleaned every one of her upwards of 15 sweaters that had accumulated while procrastinating doing the wash ourselves. This racked up quite the bill.

I would expect the average costs per wash and fold to be closer to the last three. Regardless, we will use this higher than expected costs in evaluating the value of this new expense…

Is it worth it?

There’s a few ways of looking at this.

First, in an intangible way, has this new expose been worth it? And the answer is that is absolutely has! It is a huge reload for us not to have to do this. And to always know that laundry will be ready when we need it.

And second, in a more tangible way, let’s look at the costs versus the time savings.

When I do consulting as a side gig, I charge $500/hour. A full wash/load/fold/put away laundry cycle takes me at least 1.5 hours, so that’s $750 worth of my time. And for Selenid, she charges $250/hour for her consulting time. So that’s ~$375 of her time. Add in that every hour she works towards our real estate business goes towards REPS and the massive tax savings that entails.

This all way overshadows this $267/month expense.

Now it becomes abundantly clear that this expense makes all the sense in the world for us!

There’s a lesson here

Some of you may be reading this and going “duh, of course this makes sense! Why didn’t you do it sooner?!”

But I think many more will understand where we are coming from. It’s hard to spend on ourselves. Especially for things we know are luxuries. And could do ourselves if we wanted to. Hating doing laundry is near universal. But for many people, outsourcing it is not an option. As a high income earner, I am privileged to have this opportunity.

But there is still mental block when it comes to taking action. Spending money knowing that managing expenses is your key to wealth can be tough.

But it is important to remember that once you are saving and investing enough according to your written financial plan to reach financial freedom, spending the remainder is ok.

And I think some of the best things to spend on are services to give you back your time. Like laundry service!

Because your time as a physician is very valuable. Just check out this post for more on this concept: Exploring the Time Value of Money for Physicians

As you think about evaluating any new expense in your life, I highly recommend signeting up for my free Masterclass Webinar on The 12 Steps to Financial Freedom for Physicians here or checking out my best-selling book, Money Matters in Medicine!!

What do you think? Do you ever spend time evaluating a new expense? How do you manage your expenses? What do you prioritize? Let me know in the comments below!