Declare the pennies on your eye

My friend was once telling me how she received stock options from her previous employer.

Unfortunately, the ninety day period was closing in. And if she didn’t exercise her options, her shares would expire. She wasn’t sure what to do about the situation, so my other friend, who has a background in accounting and finance, jumped in. Here was his advice to her:

The emotional and psychological burden of having to think about this is very high. Holding the stock means that psychologically tied to a company that you don’t even work for anymore. You’re focusing on this thing that you’re not a part of anymore, and it’s not the healthiest way to think. Take what you can get, sell the shares, take your bonus, go treat yourself to something nice, and close this chapter of your life.

His advice reiterates my theory about something called the sanity tax. It’s when we take proactive action to wipe a problem out of our life. Even if that means incurring some kind of opportunity cost, it’s worth it for the privilege to not think about something ever again.

We all have things like this in our lives. There is some minor cost that is disproportionate to the massive value we get in return. We pay more to get what we need rather than settling for less out of guilt, pride, consistency or frugality. We spend money to save time, reduce stress and increase joy, not the other way around.

Unfortunately, for people who haven’t yet been schooled in the time value of money, the sanity tax won’t make sense. And that’s okay. Not everyone has achieved a station in life where they can abide by such a principle.

A game changing exercise that might help you is to calculate your hourly rate. Divide your annual salary by two thousand, and you’ll get an approximate number. It’s not perfect, but it will help you become more protective of your time, your talent and your treasure.

Keep that number in the back of your mind throughout the day, and soon you’ll train yourself to identify moments in which paying the sanity tax is absolutely worth every penny.

George Harrison had it right when he sang, now my advice for those who die, declare the pennies on your eyes, cause I’m the taxman, and you’re working for no one but me.

Life is already burdensome enough. There’s no need to psychologically tie yourself to more things than are necessary.

What price have you earned the right not to pay anymore?