The 80/20 of Personal Finance: A Brutally Honest ROI Ranking
I ranked every financial habit by Return on Investment. Most of what people stress about doesn't matter. A few things matter enormously.
The personal finance internet has a long list of things it wants you to be doing on any given week, and the implication is always that they’re all roughly equally important. Whether you should be tracking your spending in YNAB or Monarch or Copilot is treated with the same intensity as whether you should be maxing your 401(k), which is treated with the same intensity as whether you’ve negotiated your phone bill recently. The whole genre runs on the assumption that more activity equals better outcomes.
After managing my own finances for the better part of a decade, and after two years on Wall Street watching what professional investors actually pay attention to, I think most of that activity is decoration. A few habits drive almost everything you’ll ever build. The rest is busywork that makes you feel like you’re being responsible.
What follows is my honest ranking of the financial habits I’ve personally used or considered, scored on what they actually did for my net worth and how much of my time they consumed to get there. The ranking is opinionated. Some of these are going to be lower than the personal finance industry would like.
Tier 1: The ones that actually built it
Automated investing. Two transfers per month into my brokerage account, into low-cost index funds. The amount has changed over the years. The schedule hasn’t. This habit alone has done more for my net worth than every other financial decision I’ve made combined, and the reason isn’t clever investing or good timing. It’s that the money leaves my checking account before I have a chance to think about whether to spend it. The decision is made once and then it makes itself forever. If I had to pick one habit to keep and throw out everything else on this list, this would be it.
Employer 401(k) match. If your company matches up to some percentage of your salary, contribute at least that much. This is the only place in personal finance where you get a guaranteed, instant return on your money. The fact that any working professional in America leaves this on the table is one of the more depressing data points in financial behavior, and the fact that some of those people are also obsessively tracking their grocery spending in a budgeting app is the kind of misallocation of attention that this article is mostly about.
Keeping lifestyle costs flat after raises. This is the one that quietly separates people who earn a lot from people who have a lot. Every time my income has gone up, the automatic transfer has gone up by the same amount, and my lifestyle has stayed roughly where it was. I’ve watched colleagues double their income over five years and have nothing to show for it because their spending doubled in lockstep. The gap between what you earn and what you spend is the only thing that becomes wealth. Protecting that gap when your income rises is the highest-leverage habit in personal finance.
Tier 2: The ones that made it stronger
A real emergency fund in a high-yield savings account. Six months of expenses, sitting in a savings account paying somewhere around 4%. Not in checking earning 0.01%. Not in a brokerage account where you’d have to sell stocks at a bad time to access it. The point of the emergency fund isn’t the interest. It’s what having one does to your decision-making. When you know you’ve got six months of runway, you say no to bad jobs, you negotiate harder, and you don’t panic-sell during a downturn. The ROI is mostly measured in mistakes you don’t make.
Index funds over actively managed funds. I spent two years inside the equity research machine. I built models, sat in management meetings, and crawled under a sequencer to read its serial number for a competitive estimate. After all of that, my honest take on whether the average professional investor can consistently beat a low-cost index fund is no, mostly not, and certainly not after fees. The Simple Path to Wealth by JL Collins is the cleanest case I’ve ever read for why this is true and what to do about it.
An annual financial review instead of monthly obsessing. Once a year, I sit down with a spreadsheet for a couple of hours and look at the whole picture. Net worth, savings rate, insurance, automatic transfer amounts, anything that’s changed. I set the dials for the year. Then I close the spreadsheet and don’t think about it again. I’ve maintained this for years. I’ve never managed to maintain a daily expense tracker for more than about three weeks, which I think tells you something about which approach is sustainable for an actual human.
Monthly net worth tracking. Fifteen minutes on the first of every month, in a Google Sheet I built years ago. I update the account balances and look at the trendline. That’s it. Net worth is the one number that tells you whether you’re actually making progress, and looking at it monthly is enough to spot real shifts without making you neurotic about market noise.
Tier 3: Fine, but stop calling it strategy
Credit card rewards. I have two decent cashback cards. I use them for everything I’d be buying anyway. I pay them in full every month. The end. People spend astonishing amounts of energy churning cards, tracking bonus categories, and optimizing redemption math, and the honest accounting is that it’s a hobby disguised as a wealth-building strategy. If you enjoy it as a hobby, by all means. But if you spent the same hours negotiating your salary or building something on the side, the return would dwarf whatever you’re getting back on dining points.
Negotiating bills and canceling subscriptions. Worth doing once a year. Not worth thinking about more often than that. My annual review catches it.
Detailed expense tracking. I used to do this and I don’t anymore. The honest version of expense tracking is that you do it for one month, learn where your money is actually going, fix the two or three biggest leaks, and then build an automated system that handles the rest. Ongoing daily tracking is the financial equivalent of weighing yourself after every meal. It produces anxiety without producing better outcomes.
Tier 4: Things that actively cost you money to do
Trying to time the market. I watched people with Bloomberg terminals, Ivy League degrees, and twenty years of experience try to do this for a living. Most of them couldn’t. The data on retail investors trying to do it is grimmer than the data on professionals, which is itself grim. Set up the automatic transfers and stop checking.
Stock picking as your main strategy. I do some individual stock investing. It’s a small percentage of my portfolio, I treat it as an intellectual hobby, and I am explicitly not relying on it to fund my retirement. If you enjoy the analysis, allocate a small slice of play money. If you’re picking stocks because you think it’s how you’ll get wealthy, you should read Tier 1 again.
The morning coffee discourse. A daily $5 coffee is about $1,800 a year. That’s real money in absolute terms and a complete distraction in relative terms, because if you’ve got the Tier 1 habits handled, the coffee is mathematically irrelevant to your retirement, and if you don’t, the coffee isn’t your problem.
What this all comes down to
If you wanted me to compress everything I think about personal finance into a sentence, it would be this: most of the things people argue about don’t matter, and the few that do are boring enough that no one wants to talk about them.
The people I’ve watched build real wealth over time aren’t the ones with optimized credit card stacks or sophisticated rebalancing schedules. They’re the ones who automated the boring things in their twenties or thirties and then went and did something else with their attention.
That’s not a satisfying answer if you’re hoping personal finance has a clever trick in it. But if you’ve made it this far down the article, I think you already suspected it didn’t.
What to Read Next
📖 The Psychology of Money by Morgan Housel. Housel’s central argument, that financial outcomes are driven by behavior and not knowledge, is the entire reason a ranking like this one exists. The Tier 1 habits aren’t hard because they’re complicated. They’re hard because they require you to keep doing the same boring thing for decades.
📖 The Simple Path to Wealth by JL Collins. The clearest case for index investing I’ve ever read. If you’re still trying to pick winning funds, this is the book that will end the project for you.
📖 Atomic Habits by James Clear. The book that made me realize the Tier 1 habits aren’t about discipline. They’re about designing a system where the discipline isn’t required.
📖 Die With Zero by Bill Perkins. The counterweight to everything else on this list. Once the system is running, Perkins makes the case that the point of the money is to actually use it.
🎧 All four are great on Audible. The free trial gives you one credit to start.
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