A decade ago at 21 years old I wouldn’t have blinked twice at the the the opportunity to wait in layover at an airport for a few extra hours for a small $50 savings. Partly this was because I didn’t yet have much earning power and wanted to stretch my dollars further and partly because of my upbringing. Growing up, I remember always hunting for deals. I’d go with my mom to Kohls, TJ Maxx, and Ross, and we’d look through the clearance racks to find the best deals. Sometimes we’d find great deals with shirts marked down 70% from their original retail price, but often we’d walk away with only one or two items and need to come back. While we certainly saved in dollar terms, I’ve also come to realize that I don’t always place the appropriate value on my time.
Time is money
The phrase is oft repeated and for good reason. Despite years of education I still see myself and others fall into the same trap of saving money at the expense of our time. Such a tradeoff might make sense if the cost is sufficiently high, but this is often not the case. Here are just a few ways we might discount our time inappropriately:
- Save $0.20/gal by driving 20 minutes out of the way to fill up at Costco rather than the station that is immediately off the road when we’re running low
- Purchase an appliance through a large retail store for a $100 savings over a comparable local company only to spend hours to try to replace a defective unit
- Spend hours of extra time on home DIY projects using a cheap cordless drill like a Ryobi, or even no drill at all, rather than spending a little extra for a quality drill like a Makita
- Commute 50 miles each way for a higher salary rather than living close to your employment or finding remote work
- Opting for in store pickup rather than pay $7 to ship the item to your house
Learning to value my time in 5 examples
If these examples appear oddly specific, it’s because they represent real examples that I’ve come across in the last few months. Even as someone who reads about personal finance for hours in their spare time and studies economics and business, I still find it difficult to value my time appropriately. I hope that by illustrating these examples I’ll be able to more effectively make decisions in the future.
Let’s take a look at these examples.
Filling a car tank
For those of us with gas powered vehicles, gas is probably the most visible expense in our lives. I fill my car almost weekly and I can’t drive more than a couple miles without seeing the price. So when the price changes as it did recently with the war in Ukraine, my first thought was to hurry over to Costco to fill up on gas before prices went up further. In hindsight this sort of reactionary thinking was silly as, the price hike only increased the price to fill my tank by about $10-15 and represented a tiny increase in my monthly expenses. Furthermore, I only save about $0.20-0.30 per gallon at Costco. So what is the real cost of going out of my way to fill up?
The nearest Costco is an 8 mile and 20 minute trip each direction and almost always has a line of cars waiting to fill up. If I didn’t make this trip, then I’d fill up at a station directly off my route home which never has a line and isn’t out of my way at all. Not including the possibility of waiting in line to fill up, I’m still looking at taking an extra 0.66 hours and 16 miles of driving to save $2-3 on a full tank of gas for my Mazda3. At the average hourly wage of $41.6/hour estimated by the Bureau of Labor Statistics for the San Francisco-Oakland-Hayward metro area and $0.585/mile provided by the IRS, the extra trip costs me $36.82. For a 10 gallon tank I’d need to save $3.68/gallon for the extra trip to make sense! The match changes of course if I’m already planning a large shopping trip, but it’s pretty clear that I’m almost always better off filling up on the way home than making an extra trip even for large savings of $0.50 per gallon.
Lesson: Price Visibility Distracts
We initially purchased our washer, dryer, and refrigerator through Home Depot. With persistent supply chain issues it made sense to schedule our order sooner rather than later. In addition, there was a Black Friday sale which made the prices more attractive. However, through a series of complications and defective products my wife and I spent easily 10+ hours over two months trying to replace a defective fridge and eventually receiving refunds for out returned appliances.
In this case, I don’t think I could have anticipated that a major F500 company would deliver a refrigerator with a broken freezer, be unable to replace the unit for well over a month, then take several more hours of calls and another month to finally get a refund. In contrast, our experience with a local company called Airport Appliances was great. The prices were within $100 for the same appliances and customer support was quick and easy. Spending more than 10 hours dealing with appliance delivery, return, and refund is likely an outlier. Still, if you’re a physician making $180/hour then the time spent dealing with this problem might be more costly than the fridge itself. The customer service problems that we originally faced with our washer and dryer led us to also use the same company for our fridge and it was 100% worthwhile.
Lesson: Paying extra for customer service is often worthwhile
During my DIY Blinds Adventure I spent 6-7 hours installing 18 sets of blinds throughout our new house. I opted to use our little Ryobi cordless drill that we had laying around to do this project but installing 18 sets of blinds was a fairly large weekend DIY project that my little Ryobi drill wasn’t well suited for. The Ryobi tool runs around $30 and is an easy expense to justify for a small DIY project like hanging a couple pictures. However, it will be outperformed by stronger and more well built drills such as those offered by Makita.
While the Makita drills run closer to $100, they are likely to save many hours worth of time over the useful life of the tool. In this one project alone I could have saved an hour or two and that time saved could have justified the added expense. While the intuition to choose a less expense alternative is generally wise, I should do a better job of differentiating between something that is a hobby versus something that is a primary tool for any homeowner. A drill clearly falls in the latter category.
Lesson: Life is long, quality tools have a long time to prove their worth
For my summer internship, several of the highest paying firms I considered were located along the peninsula between San Francisco and San Jose. For someone like me living along the I-680 corridor east of Oakland, this would mean a 50 mile and close to an hour and a half commute twice a day. I reasoned that the increased wages might make the commute worthwhile and the hybrid work schedule made the lengthy commute equivalent to working five days a week in office at only 30 miles away. However, even with the promise of a hybrid work schedule, this seemed like a rough commute.
Thankfully remote work is now more accepted and I had the opportunity to instead work remotely for a Silicon Valley based tech firm as an alternative to a hybrid internship on the Peninsula. My research revealed the internship on the peninsula paid more, but was the difference in pay offset by the remote work nature of the other job that paid less?
I estimated that the higher paying internship on the Peninsula pays about $9000/month, which is more than the $6600/month of the remote internship. However, I’ll save 9 hours commuting and the operating costs of driving a vehicle an extra 300 miles each week. For the remote job, the benefit of remote work is about $2430/month which would bring the equivalent compensation about even with the higher paying job. Considering the type of work is the same with either internship and has no bearing on my future employment, I really should value my time even more.
In an ideal world the commute would be a non-issue because I’d just live within biking distance of my employer, but I’m (1) still in school, (2) this is just an internship so I don’t know where I’ll be long term, and (3) my wife also has an employer and works in person in Walnut Creek.
Lesson: Like Mr. Money Mustache has reiterated, commuting is expensive, but remote work is a good alternative
Paying for Shipping
With the prevalence of free two day shipping offered by Amazon and other online retailers, who pays for shipping these days? At this point two day shipping is so culturally ingrained into US expectations that when REI presented me with a $7 quote to ship a child bike seat I was shocked. The nerve! I found as an alternative that I could have the bike seat shipped to a local store and pick it up for free as an alternative which I quickly agreed to.
The REI store is about 10 minutes and six miles away so using the same IRS mileage rates I used previously at $0.585/mile I’ll spend $6.84 on just the transportation cost. Once I value my time I’m coming out behind. Furthermore, anytime I need to schlep my kid around you can easily add an additional 10 minutes on top of the travel time. Wrangling a toddler, grabbing snacks, strapping her into a car seat, these things all take time. In hindsight I should’ve just paid the $7.
Lesson: Just because it’s often free, doesn’t mean it’s not worth paying for
The one thing you can’t get back
Each of the times that I opted to save money at the expense of time in the past couple months has proven to be a poor tradeoff in hindsight. I expect that I’ve undervalued the value of my own time historically and should default towards saving time at the expense of money. If a decision looks particularly expensive then I can always do a quick analysis, but it doesn’t make sense to justify every small purchase that saves me some time. Instead I should just value my time more.
We can always increase our earning potential, but we can’t get back our time.
P.S. All credits to my amazing wife Sam for opening my eyes to this concept 🙂[/et_pb_text][/et_pb_column] [/et_pb_row] [/et_pb_section] Log in or Register to save this content for later.