Choosing not to Optimize - Bro
For a while now I have treated my finances the same way. I have even gone so far as to consider canceling Netflix (something that would quite possibly cause my wife to divorce me). Doing the math $12/month really has zero impact on my finances. Choosing to not go out for lunch with a friend will save you $10 but really the joy you get from the lunch is worth much more than that. Where these decisions really matter are when you get into the high dollar items. Choosing to not optimize on taxes, your house, or your car can really set you back. In spite of that I have made the decision to make certain financial “mistakes”.
The first and most major financial “mistake” I choose to make is to keep my cabin. Our cabin is a place were my family can relax and truly unwind. Cell service here is spotty at best, the closest grocery story is 45 minutes away, and the closest thing to a tourist trap is a fun little ghost town well out of our way. From a dollars and cents point of view the maintenance is $5,000 a year and the opportunity cost is $150,000 that could be in the market earning 7%. Total the decision to keep the cabin costs me $15,000 a year. That kind of money would put me at FI sooner than on my current path but when all is said and done the cabin is worth more to me. The cabin is a source of relaxation, a connection to nature, and a private refuge. These things are worth a slower path to FI.
The second financial “mistake” I chose to make was purchasing an electric car. My old car was running perfectly fine. It was not in an accident and did not need any major repairs. In spite of all of that I decided to sell the car to a family friend at below market value and purchase a Nissan Leaf. Running the numbers my new car does save me money on gas but I only drive 6-8K miles a year so the savings is not mind blowing (about $600/year). This savings is more than offset by uncle sam taking his cut in annual registration ($800/year extra) and my insurance going up ($300/year extra). It is feasible that I am breaking even if you take into account the very low maintenance but not likely. The reason I chose to get an electric car is due to a personal effort to reduce my carbon footprint. Many arguments could be made about bike vs car, new car vs the car you already have, and if climate change is even real. I do not claim to be an expert and honestly I have not done a ton of research on the subject. I do know that an electric car is more efficient than gas cars and I know that in order for technology to improve money must be spent on those goods and services (I am rooting for Tesla but just don't have $50,000 plus floating around to buy a Model 3).
Another financial “mistake” I make is choosing to over insure. Insurance is a guaranteed loss statistically speaking. It takes money from a group of people and then gives it out to an member on rare occasion. In the meantime some of the pooled money is spent on overhead (building, cars, computers, ect), salaries and benefits for staff, and paying investors. Due to all of the costs the amount of money that is paid into the pool by the members is less than the amount of money that goes out to pay claims. I own my house and cabin outright so I am not required to have insurance on them but I do. I insure my cars above what is required by state law because if I have an accident the last thing I want to have is the emotional hit of having to sell investments to cover the costs of getting things straightened out. I also have term life insurance on both my wife and I. If I (or my wife) ever pass away I do not want finances to be a burden. There will be enough trama without having to worry about how to pay the bills or if we can pay for the kids college down the road. All in all I probably over insure to the tune of $4,000 a year but I am okay not being perfectly optimized.
All in all my choices to not optimize costs me a lot of money. Despite that I truly feel it is worth it. Just because something is not good for your finances does not mean it is bad. Life is not about dollars and cents. Life is a collection of trade offs and FIRE does not always have to win.