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Friday, May 21, 2010

How Much Is Your Time Worth?

The following question was posed on a known chatboard regarding frugality:

Are frugal living tips worth it if you have the opportunity to earn money instead?

I'd like to address this question because I think there is an underlying, yet mistaken assumptions, regarding the value of time. The hunch I get is that many people who use the argument that their time is worth more, are valuing their time at a certain rate (i.e. their hourly rate). Now, time is a very valuable thing, and we all are going to come to different conclusions about how to best use this scarce resource, but I know of very few people who can successfully make the argument that their time is consistently worth a certain amount per hour.

In halachic works, we often run into the concept of two conflicting mitzvot. Perhaps one has the opportunity to escort a chatan and kallah or bury the deceasedm and the sources are there to help determine which mitzvah takes priority. For the most part, however, we are rarely called upon to dance at the wedding of someone with no family at the same time the chevra kaddisha calls to arrange a team for a taharah. Mostly, we have opportunities which we can prioritize within a reasonable schedule. E.g., in a single day I can both watch a classmate who has no other childcare arrangement on a day that school is unexpectedly delayed and cook a meal through bikur cholim from the comfort of my own kitchen.

Frugality is very similar. Very rarely is the choice between exercising some frugal measures and making your hourly rate. I think it a bit overreaching to assume that if you weren't cleaning bathrooms, that you would be making $150 an hour working on a contract for a client. More often the choice is whether or not you want to be spending your downtime on something you would like to do and something you'd rather not bother with. Now, there are times when such an opportunity arises, in which case it is perfectly fair to compare a day's profit to the additional cost of of takeout versus an average dinner. But rarely does one really make that comparison. For example, my husband is compensated nicely, but when he comes home, he has no other opportunities for paid work as he, like many professionals, are bound by contract not to engage in work for outside employers. So while his work in the office might be worth $X per hour, at home is time cannot be realistically valued at much more than $0 per hour. If I were to ask him to run to the grocery store to pick up a number of staples that are on sale for a savings of say $30 off what we might pay should we have not caught these sale prices, it would be ludicrous for him to argue that a post-tax savings of $30 isn't worth his time because he makes more at work. If he were to put forward such an argument, I'd remind him that he isn't currently at work. (Thankfully, he too has taken some challenging economics courses and doesn't tend to put forward such arguments, rather relying on the more compelling argument that if I were to send him to the store for the sale items that he will still not know what to buy and hence I should rely on the more reliable party in the house).

To get back to the question, I think the answer is "yes". The reasons for frugality will be different for everyone. Sometimes there simply is no other choice, i.e. it is a simply necessity. Lower income frugality/ traditional college student frugality is first and foremost about staying a float, although often there is a function of achieving a larger goal. Our brand of frugality could be defined as "middle income." The savings enjoyed from frugal choice buy some peace of mind, some luxuries, and help us exercise some choice regarding our children's education, and help fund retirement and college savings accounts. I also have friends and acquaintances who have seen some real success and, with the exception of those who are just blowing their money, they too exercise frugal choices. But their frugal choices often don't resemble my frugal choices, but the elements of value and principal do play into their decisions which puts their choices on the spectrum of frugality, albeit upper income frugality.

Besides considering the real value of your time, is to remember that saving money takes practice and requires some technique. When we first got married, I was a complete wreck in the kitchen. My kitchen technique was akin to the person who can't walk and chew gum at the same time. I had no idea how to substitute ingredients. I could not multitask in the kitchen, which made Shabbat preparation an all day job as I put my full concentration into whatever single dish I was making at that moment. Cleaning seemed to take a lot of concentration too. Stocking my kitchen was a laborious task that involved many detailed lists and preparation. But, just like any other endeavor, practice is how you perfect an art or a sport. When I first learned to play piano, it took a lot of concentration to be able to coordinate reading the music, count the timing, and coordinating both hands. Now, when I sit at the piano, I might be rusty, but I can mostly rely on muscle memory and a developed sense of timing. I do think it is well worth it to perfect some frugal techniques because the dividends to pay off continually.

21 comments:

Tamiri said...

There are, in my opinion, different considerations when you apply this to a working mother who really doesn't have the koach after work to do household chores AND take care of the kids AND cook etc. Also, it's a mindset. Housework is viewed, in many circles, as punishing work rather than the means to an end (a clean house, good cooked food etc.). A woman can't do it all alone and in many households, it seems she's expected to...

Commenter Abbi said...

I agree with the first comment and will add that it's very quaint that your husband comes home at an hour when the stores are even open and he's available (ie: not continuing to work from home) for you to ask him to go buy groceries on sale. My husband comes home at 10 pm at the earliest and travels some times for 2 weeks out of the month.

I don't think this analysis takes into account what often turns out to be de facto single parent households, even when parents are together.

not sure said...

Calculate for a moment the following costs for 2 Shabbes meals to be prepared:
food (plus spices)
gas, electricity, water to cook
costs for cleaning up (may include cleaning lady)

How much time does it take to:
shop
cook
clean

versus buying take-out for those two meals

Sometimes I think that for 1-2 people, you might save more by buying take-out if you can get more work done and do with less cleaning help.

I once took on a Thursday evening job when I had one baby. My husband at first said that I needed to be home to cook. But I made about $75 after taxes and babysitting, and on my way home I went to buy overpriced takeout: salads, kugel, bakery stuff. Then I went home and cooked chicken, fish, cholent, and soup, spending about 1.5 hours, but not baking or using every machine I own. I think I did save money and work was easier than cooking...

Tamiri said...

I am going to go with the Shabbat take-out theme: to feed my family of 6-7 decently for Shabbat, it would cost around 500 nis, maybe a bit more. We are talking food from a place where it's edible and not junky. I know, because we were treated to this luxury last summer. For 500 nis I can probably prepare 4 Shabbatot. However, the time invested isn't negligable. I can't make Shabbat in twenty minutes, but I can buy for it in that amount of time. When you are a couple, and spend 100 nis for a Shabbat, it's no big deal. But as your family and children grow (and your salary doesn't grow exponentially), it doesn't make as much sense any more.
When you buy take out you save shopping time. Prep time. Garbage time (a lot of peels etc. when you cook salads etc.) Cooking time. Washing pots and pans time. If I were a high earner, I'd probably give up on the taste and quality of home-made and just do the take-out. But since I am not a high earner, it makes very little sense to buy take-out.
When you have the wife/mother working and the husband/father isn't much of a cook, there are decisions to be made. Not to cook is one of them :-)

mother in israel said...

Why not a combination? Buy the things that are time-consuming, but make your own chicken which is usually the most expensive to buy and can be thrown into the oven (and kept in the freezer so you don't have to buy it frequently).

Tamiri, I don't know of any caterers that tell you how much oil, salt, sugar, preservatives etc. they put into their food, so I am skeptical about healthy takeout.

I don't blame anyone who buys, as everyone has to make their own calculation. But I do think there is great value in cooking from scratch and teaching kids how to do it. The concept that people don't have to depend on prepared or processed foods is no longer obvious to many young people. And processed foods have a serious impact on health.

By the way, takeout generates a lot of garbage.

Dave said...

How much is my time worth?

Well, from one economic vantage point, it is worth what I can monetize it for.

From another, it is incredibly valuable -- after all, I only have so much, and I don't even know how much time I have left.

So, it's a balancing act. As is almost everything in life.

tesyaa said...

I'm with Abbi on this one. Two spouses working means that we can't always hit the best sales, shop around for the best values, etc. When my daughter wanted new shoes, I was relieved that she had already picked them out on Shoebuy.com and all I had to do was put in my credit card number. If I didn't work, we'd have had time to go to a few discount stores and maybe save $10. Of course, by working full time, I'm clearing a lot more than $10 a few times a year.

Offwinger said...

The amount of time you have in a day is finite, not infinite. This is constant for all people.

The amount of time you have in a lifetime is finite, not infinite. This varies for people and is largely unknown.

The amount of energy you have is finite, not infinite. This varies for people, though it is often known by the individual (& seldom known by others).

The amount of time it takes you to do different forms of labor varies for people. Depending on the labor, it may or may not be known.

The amount of work & nature of it that you are required to perform to maintain employment and earn a wage varies. It is partially known.

The amount of value a person places on different experiences in life varies. It too is not likely known by others.

The original post is correct in pointing out that it is inaccurate to calculate the value of one's time by a strict hourly wage calculation. However, the post seems to engage in a lot of assumptions that people's lives resemble that of SL.

My time is precious not because I am billing someone at a particular rate for my time. My time is precious because I have so little of it left after doing my job (which like many people's jobs these days is NOT 9-5) and I have only so much energy to devote to "non-work" stuff. Household management and domestic labor *can* fill all my energy and my leftover time, if I let it. The same is true for my spouse, who is also working an intense breadwinning type of job.

If anything, I value the "leisure" time (time for family, fitness, learning or hobbies) I have at a HIGHER rate than my wage. After all, my boss isn't about to accept my production of 4 hours less of work each week, even if I offered to take a paycut.

Mike S. said...

Perhaps one should distinguish between developing a frugal attitude and specific money saving tips. A frugal attitude is useful for everyone; distinguishing between needs and wants, not borrowing to consume, considering whether there is a cheaper way to meet your needs that makes sense are all habits anyone can benefit from. On the other hand, specific tips and savings methods will be more or less useful (or even counterproductive) depending on one's circumstances. I do not believe there is one universal rule that works for everyone about takeout, extra trips to the store to exploit sales from multiple chains, the value of a second freezer or any of that stuff. People's lives are too varied.

jbaltz said...

Humor break.

@SefardiLady: You write:
(Thankfully, he too has taken some challenging economics courses and doesn't tend to put forward such arguments, rather relying on the more compelling argument that if I were to send him to the store for the sale items that he will still not know what to buy and hence I should rely on the more reliable party in the house).

In our house, we call that strategic incompetence. It works a charm in both directions.

Anonymous said...

According to my law firm - my time is worth $565 an hour. Would it make sense for me to spend an hour cooking dinner or buying take out so I can spend an hour reviewing a contract.

Tamiri said...

"Tamiri, I don't know of any caterers that tell you how much oil, salt, sugar, preservatives etc. they put into their food, so I am skeptical about healthy takeout." This place claims not to use MSG (soup mix) and he says he uses Canola oil. Still not like cooking at home, but at least he's trying. I have no illusions about take-out, but some do make an effort....

Orthonomics said...

Abbi writes: and will add that it's very quaint that your husband comes home at an hour when the stores are even open and he's available (ie: not continuing to work from home) for you to ask him to go buy groceries on sale.

Actually my husband leaves the home very early and returns fairly late and I ask him to do very little, but have increased what I ask of him as I have increased demands. He does not shop, nor do I ask him to as I indicated later. But, many stores are open until midnight and if he had some practice, he too could make it through certain stores to stock up on the staples in 15-20 minutes just like I can.

Mom in Israel writes: Why not a combination?

I think MiI picked up on my point, developing frugal strategies does pay off at every income level. People at different income levels and in different stages of life will develop different strategies, but ultimately developing both a thrifty mindset and appropriate stragegies will pay off.

Orthonomics said...

Mike S-I agree. The mindset is most important. Another note: strategies change over time. Nevertheless, learning about strategies in small doses is good because it helps develop the imagination.

Orthonomics said...

jbaltz:
In our house, we call that strategic incompetence. It works a charm in both directions.


Very cute.


In our house, we call that strategic incompetence. It works a charm in both directions.


It would make sense for you to work 24/6 and hire someone to bathe you, feed you, and do whatever else is sapping your time :) But seriously, the type of frugality that someone in this income bracket SHOULD look different than the frugality of someone in even the $100K income bracket.

Anonymous said...

Similar thought at the freakanomics blog:

Why My Wife Doesn’t Cook Dinner
http://freakonomics.blogs.nytimes.com/2009/08/03/why-my-wife-doesnt-cook-dinner/

mother in israel said...

This is the best comment from the thread.

"You’ve struck on one of the limitations of economics thinking. Your conclusion makes sense if you accept that what you are is a consumer, rather than a human being.

If you’re a human being, cooking and eating dinner is one of those literally priceless human things like love-making or taking joy in spending time with children or grandchildren.

Maybe it would be more cost-efficient to outsource your love-making? Maybe we should simply never have kids because the returns on that investment are unlikely to be paid, etc.

In other words, the meta-assumption in economics that we are economic animals who at any given moment are either producers or consumers is fundamentally false. Yes, economics looks at humans as economic animals in the same way that political science looks at them as political animals, but that doesn’t mean economic or political animals is actually what we are.

Economics has limits, and (at our house at least) it stops at the kitchen and dinner table.

Mike"

Anonymous said...

I think its important for children to see parents doing basic household chores and when old enough work along side their parents. Ditto for husbands and wives working together on household projects. There is a certain togetherness (and sometimes the best impromptu conversations) while washing the car together or preparing dinner. As a stressed professional who works long hours, I sometimes really enjoy being able to just make a meal, clean out a closet or sweep a floor. The simplicity (and instant gratification) not to mention getting off my tuches and out from behind the computer, is very satisfying and healthy.

All of that said, when both parents work full time outside of the house (and therefore are probably gone at least 10-11 hours/day including commuting), something has to give and judicious and selective use of help can be a necessity for some families. As I get older, I realize that once you have the basics in food, shelter and clothes, then apart from your health, time is the most important commodity. I would rather spend money on some time-saving help than on more stuff or nicer or bigger stuff, whether it's a house, car, clothes, or gadgets.

$200k Chump said...

Hi all,

I just started a new blog to discuss the ever-growing yeshiva tuition crisis in Bergen County. I hope SL doesn't mind if I link to here :)

The blog address is:

http://200kchump.blogspot.com/

Orthonomics said...

$200kchump
I'm looking forward to reading your blog and getting some more insight into the tuition issue. If you have a guest post idea, send it my way.

Shelley said...

Remember that it's cheaper to save money than to make money. So if you are deciding between working extra and buying meals vs. staying home and cooking, you need to deduct taxes from the wages you expected to earn.

Except for you, $565-an-hour-Anonymous. I know that's not what you make after the firm takes its cut. But really, this is not a $565-an-hour conversation, is it?