Converting time into money(Read article summary)
The time you spend at home on frugal tasks directly converts into money saved, Hamm writes.
What is an hour of your time and energy worth?
In simplest terms, an hour of your time is worth whatever you’re paid for an hour’s worth of work at your job. After all, you’re repeatedly willing to spend your time and energy at that rate, so it must be an exchange rate you’re happy with.
In fact, that’s a pretty good metric to apply to the rest of the time that you have. If there’s a frugality tactic that can earn you a better hourly rate than what you make at work, why wouldn’t you do it?
Here’s an example of what I’m talking about. Let’s say I can make a batch of laundry detergent in fifteen minutes that, after expenses, saves me $6 over the store brand. Since I need laundry detergent, I end up saving about $24 for every hour of my effort.
Another example is making bulk meals in advance. If a meal costs me $6 to assemble, but if I assemble four at once, it costs me only $5 per meal, resulting in the extra time I spend assembling them saves me $3. It might take me an extra half an hour to do it, but it’s an even better deal because I’ll get the time back later when I have easy-to-prepare meals in the freezer.
You can make comparisons like this with almost any frugal task you take on.
If you find that preparing a grocery list saves you an average of $20 per grocery store visit – which is a reasonable amount for a well-considered grocery list to save you – and it takes 45 minutes to prepare it, then you’re saving $26.67 per hour spent assembling grocery lists.
If you spend an hour making your own homemade dry soup mixes that cost two dollars less per mix than the ones at the store, but you make twenty of them – enough for the whole winter – you’re saving $40 per hour.
The time you spend at home on frugal tasks directly converts into money saved. It’s a direct conversion, one with an hourly rate you can calculate if you keep track of the time invested and the money saved on the item.
For me, I shoot for an hourly rate of $10 to $15 (depending on the task) when I’m doing something by myself, or a rate of $5 if it’s an activity I can do with the kids. I’ll usually try an activity once and calculate the hourly rate of my savings and if it’s around the $10 mark (or around the $5 mark if I can do it with the kids), I’ll make sure to keep it in the repertoire.
Do this calculation regularly, and you’ll also find yourself with a useful tool for deciding if a new frugal activity is worthwhile enough for you. If you’re just not saving much money for an hour’s worth of effort, there’s almost assuredly a better way to spend that hour.
A frugal task that cuts your expenses by a certain amount is just as good as working for that money – or, arguably, better since you don’t have to pay taxes on the money you save with frugality. Calculate up how much you save for a task, compare it to what you earn at work, and you might have yourself a new appreciation for frugality.
This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.