Author Topic: Insourcing - What's worth your time?  (Read 3441 times)

cbr shadow

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Insourcing - What's worth your time?
« on: July 03, 2014, 12:45:33 PM »
I'd like to clear something up about insourcing vs outsourcing work.
MMM has blog posts talking about insourcing everything, from cutting your own lawn to doing home or car repairs, etc.
Some of his earlier articles also say that your time is worth $50/hr.

Dont those two things conflict if someone offers to mow my lawn for $30, which will take him 2 hours?  Does this mean any task that I can outsource for less than $50/hr should be outsourced, since my time is worth so much more?  Obviously this wasn't the intention of MMM, but I'd like to see this discussed.

neo von retorch

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Re: Insourcing - What's worth your time?
« Reply #1 on: July 03, 2014, 12:47:54 PM »
That really depends on how you use your newly freed up time! My time is worth $0/hr when I'm not at work and not working on freelance, unless I'm actually doing something like fixing a car or leaky pipe. Then my time might suddenly be worth $75/hr. So if I can pay someone $30 for 2 hours of mowing, and that's the only way I have enough time to fix those pipes... it's worth it. But if I sit on my patio sipping margaritas while I watch the neighbor mow for me, I'm throwing money away.

ketchup

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Re: Insourcing - What's worth your time?
« Reply #2 on: July 03, 2014, 01:26:47 PM »
I insource as much as possible.  Cooking, lawn care, car repairs, computer work, house work, and other things that I'm probably forgetting that other people outsource.  The last time I paid anyone to do anything for me was probably when I got an exhaust leak on my last car welded shut.  I don't know how to weld (yet).  Coincidentally, my exhaust in my current car got stupid loud starting yesterday afternoon, so it looks like I might be doing that over again.

frugaliknowit

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Re: Insourcing - What's worth your time?
« Reply #3 on: July 03, 2014, 01:58:58 PM »
If you are working, figure out your after tax hourly earnings.   You can use that as a "plum line" or guide as to what your maximum in-sourcing rate is. 

For example, if you are paid $25 per hour and in the 25% tax bracket, you actually earn $18.75 per hour.  If I am "on the fence" as to whether to hire someone to do something, and they are asking $50 per hour, your time would be better spent doing it yourself (in-sourcing).  This assumes you otherwise do not have the time and that your time competes for other productive things to do. 

Keep in mind that with some tasks, there is a steep learning curve where it will take you much longer than a professional.  A perfect example of this was when it became law for condo owners in my building to install automatic door closers (Fire department ordinance).  I never installed one of these.   The building management offered to install it for a fee.  I installed it myself at a savings rate of $16 per hour (took me 4 hours to get it right and saved $64) because it took me forever.  It would have taken them (and me after I taught myself) about 30 minutes.

cbr shadow

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Re: Insourcing - What's worth your time?
« Reply #4 on: July 03, 2014, 02:06:28 PM »
All good points here - thanks!

shotgunwilly

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Re: Insourcing - What's worth your time?
« Reply #5 on: July 03, 2014, 02:25:34 PM »
If you are working, figure out your after tax hourly earnings.   You can use that as a "plum line" or guide as to what your maximum in-sourcing rate is. 

For example, if you are paid $25 per hour and in the 25% tax bracket, you actually earn $18.75 per hour.  If I am "on the fence" as to whether to hire someone to do something, and they are asking $50 per hour, your time would be better spent doing it yourself (in-sourcing).  This assumes you otherwise do not have the time and that your time competes for other productive things to do. 

Keep in mind that with some tasks, there is a steep learning curve where it will take you much longer than a professional.  A perfect example of this was when it became law for condo owners in my building to install automatic door closers (Fire department ordinance).  I never installed one of these.   The building management offered to install it for a fee.  I installed it myself at a savings rate of $16 per hour (took me 4 hours to get it right and saved $64) because it took me forever.  It would have taken them (and me after I taught myself) about 30 minutes.

The math isn't right, but I understand what you're saying.

I agree that it depends on what you're doing with the extra time it frees up.  If it frees you up to go to a friends birthday party, then i would say your time is worth paying someone (if it's a reasonable rate.) If you are freelancing in the free time, then it's worth it if your hourly rate is over your cost to outsource. If you are sitting on your ass watching MTV, then you're time is worth about $0.00/hr, and i would say get to work you lazy ass.

grantmeaname

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Re: Insourcing - What's worth your time?
« Reply #6 on: July 03, 2014, 04:21:55 PM »
I really get a lot of satisfaction out of insourcing things even when the financial angle is excluded. I put a movie on and cleaned and shined my shoes tonight and had a great time, and that wasn't even an interesting task or one that you learn from. If it's something actually cool, like cooking, or something where I still have a great deal to learn, like sewing, that's even better. Saving money is just an additional benefit.

Rural

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Re: Insourcing - What's worth your time?
« Reply #7 on: July 03, 2014, 08:28:13 PM »
This calculation will change over time, too. I am determined that my husband has changed out the last big truck transmission he ever will change (and most of the time he agrees with me). That's a job for a younger man than he is.


So for us, it's no longer quite all about price; there are other "costs" that we're not willing to risk paying; things like injury, or even extensive soreness that doesn't heal as fast as it once did.