Are Your Short-Term Actions Ruining Your Long-Term Wealth?

Short-term actions have long-term wealth consequences. It's always very tempting to take shortcut cuts because they are easier. For example, you might remodel a kitchen without a permit to save money. But long-term, not using a permit will rob you of your home's maximum resale value.

Short-Term Actions Ruining Long-Term Wealth

I must be the biggest donkey on Earth because I just spent an egregious amount on a handyman to fix some things. I've had a funky bathroom window that would not close properly for years in my main San Francisco rental. I tried to fix it, but couldn't. My tenants never complained over the years, so I let it be. The window is in a small bathroom without a vent, so having the window slightly cracked open helps relieve moisture.

Then one fine summer day my tenant's neighbor below decided to start grilling on their little deck. Smoke would waft into the bathroom and through the rest of the apartment.

So when my tenant texted me to fix the window, I said “no problem” and found a handyman on Craigslist immediately. He is actually a licensed contractor on Craigslist with “no job too big or too small.” In retrospect, I used a sledge hammer to push in a thumbtack.

Good Value

He stopped over to visit my tenant directly and gave an estimate for $225. I told my tenant to tell the handyman everything else she'd like fixing while he was there besides the window. She mentioned a broken dimmer switch, and a faucet cap that needed replacing. Perfect. Fixing three things in one visit every year or two isn't that bad.

Although $225 sounded steep at the time, I agreed to the estimate because I figured he would take at least an hour to do all the work, buy the parts, and commute back and forth for two visits.

I was also happy to not have to physically go out there and meet the handyman for either visit. I asked the handyman whether I could get a discount if the work took less than a couple hours, and he said it was flat fee. Fine.

I told my tenant to tell me how long he took to fix everything so I could see whether I was getting my money's worth. She texted back, “Maybe 15 minutes, no more.”

Damn! What a moron I am! My short-term actions were good. But maybe not.

Maybe My Handman And His Short-Term Actions Hurt Him

During my correspondence with the handyman, I told him I was planning on building a deck and expanding a bathroom in my house. I needed to hire an architect and a general contractor to do the work, and he was welcome to stop by after the rental property work was done to give me an estimate. He sounded enthusiastic.

Part of the reason why I highlighted a bigger project was to help keep him honest from price gouging me on the small job. Although I don't have a problem affording $225, I just don't like getting taken advantage of. I'm a frugal person who likes to get a deal and the most value out of a product or service just like anybody else.

The job shouldn't have cost more me more than $100 (one hour total commute time, $25 in parts, let's say one hour of labor). In other words, I feel like I was robbed by $125.

His Short-Term Actions Cost Him A Bigger Job

Yes, I should have spent more time searching for someone cheaper if I really wanted to save money. But given the infrequency of these fixes, the fact that I thought the work would take at least an hour based on his guidance, and all that I have going on right now with my existing house, I was willing to pay a premium just to have these problems off my plate. I was just hoping the handyman would have given me a discount given it took him only 15 minutes.

The handyman said he was planning to come to my new house to check out the scope of the project. The first thing I did was text him to make sure he's not charging me for the visit!

Although I am annoyed I overpaid, I still had him come out to give me an estimate because more estimates are better than fewer when doing remodeling work. Furthermore, I want to get my money's worth from him.

I Felt Taken Advantage Of

His problem is that I am completely biased against hiring him to do the job. He might have a 2% chance of being the winning contractor due to his $225 charge for 15 minutes of work. As a result, he is probably going to miss out on $20,000 – $30,000 in net profits over a couple months.

To be thorough, it wasn't just his overcharge, but his last-minute rescheduling with me and my tenant, and then lying about why he had to reschedule that reduced his chances to 0% for building my bathroom and decks.

He originally said he couldn't make it to the scheduled appointment because he had to stay back in Marin County to finish a job. Then inexplicably, he came clean that evening and said that actually his fuel injection in his old trucked needed fixing. He then proceeded to call me an obsessed 10 times over the next three days to schedule a follow up.

Related: How To Make People Happy All The Time

Your Short-Term Actions Have Consequences

I'm not sure what it is when dealing with some electricians, builders, painters, and plumbers, but they seem to all be focused on short-term profits at the expense of longer term gains.

If I wasn't gouged, I'd happily pay them more to work on other properties I own. I'd also happily write them a glowing review online or refer them to many friends who also need work done. But the folks I've encountered all have this, “I need to get mine, and I need to get it quickly as possible,” mentality.

I candidly asked an electrician about this mentality, and he said that it's because work is not steady. “It's feast or famine in our line of work. We never know when we'll get our next job.” This is despite the fact that he makes $150,000 a year as a union electrician!

I understand the cyclicality of business given I see 20-35% online traffic swoons between summer months and the rest. But I also know plenty of good trades people, architects, lawyers, private doctors, etc. who are so busy I can't even get on their calendar for months sometimes. The reason? They are great at what they do, their prices are fair, and they have an unending stream of referrals from happy customers.

Referrals and glowing online reviews are a goldmine for any business. I definitely won't be referring this handyman to anyone. I definitely won't be referring my electrician who says he's only charging me three hours of work for the day, and then calls me at the end of the day while I am still at work, saying he's been there all day and will bill me accordingly. 

My handyman who earned $225 should be the wealthiest handman in SF. But he can't afford to fix his beater truck and leaves in the boonies.

My #1 business advice is this:

Think in three-to-five year chunks. Whatever you do today, focus on the rewards 3-to-5 years from now. That way, you'll focus more on doing the right thing, and not focus so much about extracting as much money as possible from your clients.

For the first two years, I practically wrote for free on Financial Samurai. Making money was not the focus and will likely never be the focus. Building a community and getting to know interesting folks is always going to be my #1 priority.

Only after the second year did I pay more attention to monetization because I was itching to do something other than my day job. Two years after leaving and now 10+ years after starting this site, I can finally stop worrying about falling into the abyss.

Financial Samurai today generates over 1.4 million organic pageviews a month. It is a labor of love and provides enough income for me to take are of my family in expensive San Francisco. The reason why I've been able to grow this site is due to my focus on the long-term. I've written 3X a week for 12+ years now!

Build relationships with your clients over the long-term. Show them more value than you charge today. If you do, you'll win fans for life who will sing your praises to others.

Related: Build Better Relationships By Keeping Things Close

Build Long-Term Wealth

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The best tool is their Portfolio Fee Analyzer which runs your investment portfolio through its software to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was paying! These short-term actions can end up costing you a fortune in the future.

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46 thoughts on “Are Your Short-Term Actions Ruining Your Long-Term Wealth?”

  1. I am an electrical contractor myself, and Whilst i do agree with most of your post and i endevour to provide a top quality service to all my customers

    If you ask a contractor for a fixed price for a job, he then takes a certain amount of risk on how long the job might take and materials needed, you said about maybe getting a discount on the job if it was done quickly….what about if it took him longer and he then asked you for more money?

    A contractor is self employed, the fee you pay does not all go directly into his pocket, he does not get a company pension, sick pay, medical care etc, all this comes from his profit

    So please dont be too judgemental when assuming you have been ripped off

    There are good trades out there but they will always be busy, as they keep customers for life, you will rarely find these people on line unfortuanatly

  2. Pingback: Why Home Remodeling Always Takes Longer And Costs More Than Expected | Financial Samurai

  3. Pingback: Do You Have The Right Money Mindset To Get Rich? | Financial Samurai

  4. I’m constantly reminding myself of this when I’m spending money on food and drinks for networking. A small investment is well worth the expenses for a long-term relationship. Being too cheap to see that is incredibly shortsighted.

  5. Lance @ Healthy Wealthy Income

    Man I have learned this lesson multiple times. Why rush in to something? I almost placed a $25,000 sign on our new business just because I wanted to get it up early so we could be advertising. I was in such a rush to get it done because “why wait until tomorrow when you can get it done today” and then we decided to not move in to the building. That would have been a huge mistake. Some issues deserve time and attention. Can the project be vetted a little bit more? Have you thought of all the issues that may arise? Is there any reason to rush in to it right now? Sometimes financially I want to jump in to something, but I really try to step back and observe if I would make this decision down the road. What do I wish I had done 3 years ago that I didn’t do? Short and long term goals are essential to getting things done, but why the rush? Better to make the right decision than to just make a decision.

  6. Stefanie @ The Broke and Beautiful Life

    I really hate that many of the service industries don’t have a clear and set pricing structure. I never know when it’s a good deal or a rip off.

    Though the health industry has a tendency to be super shady too. I used to go to the physical therapist once a week for my back and I would get these outrageous bills every time. I’d bring in the bills and say, do I have to worry about this? am I good on my insurance? etc. And they’d always say, it’s ok, don’t worry.

    I think the office was just arbitrarily charging for services trying to get the most out of my insurance company as possible. I stopped going.

  7. I think all of the scams within the travel industry are another good example- taxi drivers who scam tourists for higher fares, trip operators who swindle people out of money, hotels that lump on a bunch of hidden fees. All of those things make it less likely that someone will return to a particular area.

  8. Great article and great advice! I’m not one that uses contractors often but I am a contractor to others (in a sense). This is a great reminder there’s often greater reward for relationship selling rather than transaction selling.

    Thanks Sam!

  9. While I definitely agree with you about looking at the long term, I don’t think the analogy quite fits.

    If he had fudged his hours, I could see a problem. But, he said upfront it was a flat fee and you knew what work you were getting done. You were not “gouged” since you willingly accepted the offer and could have gotten multiple offers. Assuming his work was good, it’s still your fault for hiring him.

    I say this because I have my own flat rates for doing technical work on house calls. I had a great client whom I helped frequently but he started to want to pay me less. Granted, I maybe spent 5 minutes actually helping him on one of the last visits, but he knew my general rate and knows it is well out of my way to pay him a visit. Needless to say, we don’t do business anymore.

    1. He said flat fee after I asked him for flexibility on pricing if he finished sooner after he gave me the estimated time of work.

      Yes, at the end of the day it’s my fault for hiring him. And I’ve given a six figure job to someone else. All good.

  10. Great article Sam. I have a contracting business in Alabama. Doing honest work and estimating is always better for long term business goals. Most of our new work comes from repeat customers and word of mouth referrals, it all starts with the first job.

  11. Jay @

    Just think forward to when you find a great handyman. It’ll take such a weight off your shoulders across all of your properties. Plus it works in the favor of both parties. Perhaps coyly let them know you have more work in the future and see if that influences them?


  12. Handymen are the new doctors! You use them because their rates are lower, but it adds up fast. You think they are cheaper than most professionals, but they are not. On top of it, they are usually somewhat arrogant because there are a small pool of them and they are in demand. I recently used one for some minor remodeling. He was cheap, but took too long.

  13. Often when you hire a contractor for any small job you pay a minimum of 4 hours billing. It’s just the way the business is and is pretty standard across the U.S. And as far as the estimate goes many people don’t realize the actual costs of the projects. People do renovations and builds so infrequently they do not understand the costs of the project. Many times estimating work for people ends up wasting your time and your goodwill with subcontractors and suppliers. It’s something like 3% to 5% of estimates for new customers become actual jobs. In light of the 15 minutes of work he had to do at the house he probably imagined that the estimate wasn’t going produce a job.

    And as may plasterer likes to say ” It’s not how long it took me to do the job, it’s how long it took me to learn how to do it.”

    1. Never realized I have to pay 4 hours of billing for one job, no matter how small it is. Can this really be true?

      Maybe it’s time for me to get my contractor license and do small handyman jobs too. Work 1 hour to get paid 4X sounds like a winning proposition to me.

      1. Never works out that way… You also get a lot of stiffs. You’d be surprised how many people don’t pay or want to renegotiate the price after the works done. That’s why I generally only work for a few developers and any new customers are only from referrals. That way I can call up and sort of check the person out, see if they are serious or more importantly if they pay. But since your getting more into the real estate thing it would make sense on your end to become a contractor. You’d be able to pull permits on your own work, GC your own jobs, and build relationships with people in town hall ( building, zoning, tax assessors). Comes in handy when you wanna fight an increase on you property valuation (Hint: you only fight on the basis of the building since land is always considered unique and non compared. A building in theory could be built anywhere).

  14. This is so true Sam. I have a good friend from high school that started his own business digging wells and replacing water pumps. He charges pennies compared to the others in our area. While some may think he is foolish, he is charging a good rate and provides stellar service. As a result, he always has work. He gets a ton of referral business all the time.

  15. Glad you got the window fixed but sorry you had to deal with that! Good advice about thinking 3-5 years in advance. I didn’t make any money off of BudgetBlonde for two years. I just did it as a hobby and for fun. When I redesigned and moved to wordpress and made it look more professional things really started popping. Many newer bloggers and writers get frustrated that they can’t get the income they want right away but it takes time to build up these relationships etc. Your handyman definitely missed out with you!

  16. I know it must feel like you got ripped off but the contractor is taking into account his cost of running a business. If he had charged you more money than quoted than I would feel like I got ripped off. But it seems that you are just complaining because he did it faster than you thought. It seems that everything went according to expectation except that someone did not meet your expectations. I don’t know the full extend of the situation but if the contractor showed up and did the job for the expected amount I would consider that a positive exchange. I understand your point about long term thinking as a business, but also considering the demand for handyman services it seems prices will always rise with limited supply.

    1. The agreement for $225 was based on his guidance for around 2 hours of work. I figured he would have to remove the window, repair the hinges, etc. As far as I know from my tenant, he just used WD40 and didn’t clean and remove the window. So it’s dumb of me not to figure out out. But I was expecting more work hours to be done, otherwise I wouldn’t have agreed to $225.

      If I knew it was only going to take 15 minutes, I would have figured the stuff out myself or hired someone else. Hope that makes sense.

  17. This is pretty good advice for everyone. I once hired a moving company to help me move my things and they quoted me one price and then before they unloaded my stuff from their truck were charging me a different price (over $150 more). I was forced to pay or call the police and risk them ruining my stuff. Since then, I’ve moved twice more and had friends that moved multiple times and in no way, shape, or form we would call that moving company again. If they were honest I would use them again and again. Instead, I found a different company that charged a bit more (actually less if you don’t count the extra $150) and I’ve got them business 5 times. The first company lost 5 different moves because they wanted to get an extra $150 from me.

  18. Sounds suspiciously a lot like how people should approach their investments and finances as well :P

  19. I’ve been wondering about this new trend where restaurant servers post photos shaming poor tips left by patrons (usually large groups or celebrities). It seems extremely short-sighted. You’ve pretty much guaranteed a lost customer for life. …As well as the payer’s friends and family and many lost recommendations. If I owned a restaurant and found out a server did that, not only would they go home with a poor tip but they’d have a pink slip in the other hand.

  20. Todd Guthrie

    I’ve had similar experiences with residential contractors here in San Francisco.
    The good ones are great, but extremely busy. You can tell these ones because they are always responsive, they always communicate, they explain things, and they ask a lot of questions about what you want. You might have to wait months to schedule them however.
    The bad ones will delay, make mistakes, delay again, make excuses, forget something, make excuses again, and generally cause lots of headache.
    There are also even a few malicious contractors who take advantage of people by, for example, taking a huge down payment, doing minimal or no work, then placing a mechanic’s lien on the property.

    There was one contractor, I called for the first time, and he didn’t pick up so I left a message. Ok, he must he on the job, that’s perfectly fine. But then he calls me back 15 minutes later with a very elaborate excuse involving his truck, his workers, his location, the weather, as to why he couldn’t pick up the phone. Not a good sign when he already starts making excuses as part of the very first communication.

    When dealing with contractors, just remember the following basic advice:
    – Planning everything you want beforehand is a lot cheaper than asking for change orders later.
    – Fixed-price contracts (“not to exceed this amount”) are almost always the best for a typical homeowner with a typical project
    – Your down payment should not exceed 25% except for very small projects.
    – Most of all, remember that the contractor’s attitude, communication, and professionalism are at their very best when they are trying to get the job. It’s only downhill from there.

    1. “Most of all, remember that the contractor’s attitude, communication, and professionalism are at their very best when they are trying to get the job. It’s only downhill from there.”

      I’ve experienced this as well. You will enjoy my upcoming post.

  21. Fresh out of college, I went by my dad’s office. A lady walked through the hall that was an accountant officed near by. My dad said to the lady, “Austin’s going to need someone to do his taxes”. She said “alright, set up quick books and I’ll send you a chart of accounts to keep your information straight, at the end of the year we can file your taxes for you”.

    A few weeks later my dad got a bill in the mail. it was for like $37 for 1/4 hour with the line item “discussing chart of accounts with Austin”.

    It would be difficult for me to imagine a more asinine business acquisition method than that. I didn’t let them do my taxes.

  22. You should do a few blog posts on costs of renovations. I just bought a house in sf and have such a wide range of estimates for a bathroom remodel. I think there is also a premium in sf as well.

    Also anecdotally I tried to get a few painters and landscaping architects to give me a quote on some work. They are all booked for months. Same with a few general contractors I called. I guess a good problem to have a sign we are not slowing down anytime soon.

    Another interesting post could be about doing the work yourself vs paying someone. Your hourly rate plus weekend doing work vs cost for someone else.


  23. FS, it is never fun to feel taken advantage of, and a little integrity and ‘client-management’ on his part would have gone a long way. Changing his story is a big ‘tell’, and imo you should not use him. In my experience, this is a ‘test’ where the vendor/contractor will see what you will tolerate. If you will tolerate a ‘white lie’ and delay in schedule, what will you do if your deck is half-complete and he disappears to take other work he has booked? If he hands you a bill for 15% more than the bid, explaining a change in scope or increase in materials cost? Watch out! When you go out on your new deck, you want to enjoy it and not be reminded of the contractor who made you fell skeevy!

    That said, there is another side to the issue of $225, and I hope this will make you feel better about paying it. To get the skills to fix all 3 items on your tenant’s punchlist takes many, many years. That on-the-job training is something that has to be paid for by the clients; you know yourself how time-consuming and frustrating it is to try to fix something that is outside of your skillset.

    Here is a 2-minute clip showing the client/vendor relationshipfrom the vendor’s perspective. Hope it gives you a smile. As a vendor, I have been on the @$$-end of a terrible bid where it may take me four days to perform something estimated at one day. Nobody is happy when that happens. Would you have been OK if it took the guy seven hours and he had to commute back in rush hour? Bottom line, you got your problem fixed, which is not nothing, and your time is worth computing into this calculation, too.

    1. Yes, I would be happier if he took 7 hours to fix the problem if I am to be absolutely honest. And I would have paid him more as well.

      15 minutes to do a job vs. his guidance of 2 hours is bullshit. That is 1/8th the amount of time, and I equate time with money.

      I recently had a contractor with another guy earn $450 for an entire day’s worth of work.

      My fault for accepting the bid, and not figuring things out myself. I’m disappointed by how wasteful I was in this case w/ money b/c I’m usually very careful.

      But as I wrote in a previous post, optionality means a lot to me. To be able to pay up and have things fixed and not deal with folks is very valuable.

      1. You are entitled to your feelings. But if I may offer this thought…a handyman working is not like a one-hour tennis lesson, or a schoolteacher who has to be in the classroom bell-to-bell 180 days a year, where the price is based on time. If you fix a backhand in 20 minutes, the job is not over. A handyman gets paid for results, not time. He has estimated his time, and you have reserved his time. He can’t resell his time when it becomes suddenly available when the job goes better than expected, and while you are generous to offer to pay him more if the job took seven hours that is not a standard business or customer practice. If you truly want to pay for time-only in the future, that arrangement can be made with any contractor; just watch out for ‘goldbricking’ and ‘gilding the lily’, where they double-check and recheck their work.

        Also, your union electrician pal must have a senior journeyman position with IBEW. My guess is he works for a public agency or utility, and the $150,000/year includes contributions to time off, health and pension. Craft construction jobs are tough to arrange for a normal 40 hour-week for any length of time. A good gig, and not too common.

  24. Myles Money

    Everyone likes to feel as though they’ve been treated fairly, or at the very least like they’ve not been taken advantage of: that makes you feel bad for yourself that you’ve allowed it to happen, and angry with the guy who “robbed” you.

    People buy from people and each time you do business with someone (particularly the first time), you’re building (or destroying) a relationship. I’m not surprised you don’t want to work with him again, but if you were satisfied with the work he did for you at the other property, perhaps a better way to deal with it would be to persuade him that he needs to be extra-competitive for the next job because you were so “generous” last time: the point is that you weren’t dissatisfied with the standard of his work and he is clearly desperate for more. Sometimes it’s better the devil you know…

    1. I will never give him any work, and I have A LOT of work he could do. In any initial relationship I’m always trying to give more than I take in. If I encounter someone who is inflexible, and the complete opposite, forget about it.

      He wasn’t even an easy guy to schedule w/ his last minute cancellations, false excuses, and so forth.

      If you charge $225 for 1 hour total of work and $25 of labor, you should be rich if you are good. But he is clearly struggling. Why struggle, when you can thrive?

  25. A rich person thinks long-term, a poor person thinks only to the weekend.

    Time to start working on my 3-year plan. Thanks for the reminder.

  26. Wall Street Playboys

    Agree with this, planning for 3-5 years is best (planning for 1 year is too short, 10 years is too difficult)

    You should like this quote:

    “Never trade what you want the most for what you want in he moment”

    They are trading a short term monetary gain for the loss of 3+ years of gains. Never works!

    1. Good quote. And the other good thing is that once you start thinking in 3-5 year chunks, it’s only the first 3-5 years where you have to be patient. Then it’s returns every single year for as long as you continue.

  27. I recently found evidence of a mouse so we bought traps and sealed up the basement ourselves. We caught two adults… Then a baby. When I saw the baby, I knew we were in for it – the babies would soon breed and we’d be overrun. So I called an exterminator and braced for the cost – we live out in the middle of nowhere, so we often get charged for travel time to our place. They quoted me upper 200’s to nearly $500, depending on how big my house was and how many materials the man would have to use.

    Well, he reused some of the traps we had, plus some of his own and told me my hubs had done a good job sealing the basement. Gave us some pointers.

    Then charged me about 30% of the quote.

    Guess what? They have my business for as long as I live here.

  28. I have the same issues with contractors Sam. My biggest frustration is scheduling them and them actually showing up on time. If you’re gonna be late, simply call ahead and communicate!

    Just bought another house (primary) and I’m trying not to get too worked up about sloppy work. Example-if you install lawn sprinkler systems for a living, take pride in that and install them correctly and adjusted to the yard the first time!

  29. I think the analogy to delayed gratification is very apt here. I call those short-term decisions “road-bump opiates”–it might feel good at the moment, but it’s going to hurt your long-term goals. Thinking only about short-term profits or successes is the same as spending money without a financial destination in mind. It’s all about the long-term.

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