Author Topic: Rent money or time money?  (Read 3641 times)

fuzzhead1506

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Rent money or time money?
« on: September 15, 2013, 11:51:44 AM »
Long time lurker, first time poster, here. 

I feel like I searched through the forums pretty well for someone with a similar thread, but none seemed really appropriate to resurrect given the unique situation presented here:

I am at a crossroads with my soon to be wife (the DFutureW!).  DFW and I are in a position where we have laid out the theoretical and real costs of different places to rent around the area which we intend to live.  I tried to be reasonable by insisting a time value of $10/hr for time spent commuting 45 minutes less a day(not my real cost since I will be on a bike :D - however interesting to consider because of what we are paid and how little time we have to spend together as it is) plus the ability to cook together (highly valued) plus various other amenities including a gym and free internet and a garage at one place.... and this allowed me to value two of the places we have looked at renting very similarly.  Most of that is valued in intangible payment to myself of the commute time I regain by having this other more expensive place.  Mind you, this other place has virtual golf, as well (!!). 

I am having a difficult time explaining that there is a value to my time.  Kinda made me think of these articles:

http://www.mrmoneymustache.com/2012/10/18/why-your-time-is-worth-way-more-than-25-per-hour/
http://www.mrmoneymustache.com/2012/12/18/your-money-or-your-life/
http://www.mrmoneymustache.com/2012/02/09/brave-new-life/
http://www.mrmoneymustache.com/2012/10/08/how-to-go-from-middle-class-to-kickass/


Now, mind you I haven't read YMOYL, but I understand pretty well the concept of how we should value free time.  I also very much value what BNL has to say about FI and money.  For us, it is currently about the difference in Middle Class to Kick-ass when we consider the rent money (interest payments).  I had a hard time even justifying my own position, but my time is indeed the kicker for me.  Here's to hoping that it pays CEO level wages.

I had a very difficult time trying to convince her that we should live in a minimalist type apartment for as long as we can handle doing so, and therefore conceded to having something with a little bit more space.  Just an FYI, We were comparing 2BR/1BA apts in the Lakewood area of Colorado.

The reason I come to you is because I want to discuss why we should value time more than things that actually cost us dollars and cents?  Especially during our working career?  When we are talking about saving for retirement, at what point does the time value become more important than the money value?  Is the frugality actually related to "the money that we spend" or "the time that pays dividends in other ways" (for our working career, anyways)?  People can, and should, chime in if they have an opinion about what should be considered after our working career, too.

In case anyone was wondering, we ended up going with the more expensive (actual cost) place.  And, not I, but the DFW seems to have a sort of renter's remorse... kinda odd since I was the one suggesting we live with fewer frills at first, but since this place has a better location for me and her combined, it made a lot of sense to me to pay extra on the rent. 

P.S.  I actually tried convincing her that we should buy a luxury RV and live Jacob-style, but DFW wasn't having any of it... the lack of space would've killed her.  I decided it was time to pick my battles (i.e. getting her to bike to work vs. minimalist living).

I don't really feel there is any advice that is gonna sway the two of us in one direction or the other, but I thought that this would make for an interesting conversation.

lhamo

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Re: Rent money or time money?
« Reply #1 on: September 15, 2013, 03:01:29 PM »
I'll probably get slapped upside the head for it, but I would say that the time value of money can be incredibly important, especially as you move into higher income levels.

In our case, we have a part-time helper who comes in every weekday afternoon to clean the house and cook dinner.  She also takes care of our cat when we go on trips (several times a year -- we have family in two countries and get a decent amount of vacation).  We live in China so the cost of this is reasonable (around $300/month).  This arrangement started off as a need (dual career couple and needed someone to be home to pick up the kids from school and keep an eye on them), but as the kids have gotten older it has morphed into more of a want.  I have considered dropping the arrangement, but in reality that would probably be a "penny wise pound foolish" arrangement.  Paying someone else for these services allows us to have a lot more time for family activities and reduces stress immensely.  If I had to make dinner every night after a long/stressful day at work and a horrendous cross-town commute, I can pretty much guarantee that our food bill would go up considerably, both because I tend to prefer cooking western style meals (for which the ingredients are more expensive than the Chinese food our helper usually cooks) and because given my schedule there is a pretty strong possibility that I would get stuck at work at least 1-2 times/week, leading to takeout as a fallback.  And the cleaning -- oh my, where to start?  I am not a messy person, but DH is EXTREMELY fastidious and I know that if we didn't have someone taking care of the dust and cat hair every day we would end up in arguments about how often the house needed to be swept/vacuumed and who should do it.  He would probably do it, as it bugs him more, and I know from his habits on the weekend that that often leads to resentment.  $300/month to have someone do this stuff for us is cheaper than marriage counseling and definitely cheaper than divorce!

But this is a relatively small luxury that we can easily afford.  Should our employment situation change and our income drop, we would definitely let it go and find a way to deal with the consequences. 

lentilman

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Re: Rent money or time money?
« Reply #2 on: September 15, 2013, 07:28:44 PM »
I would look at the time/hr in another way.  Instead of valuing your free time lost to commuting, you can calculate the hours of life consumed by work you are exchanging for shelter. It will be easier with numbers, so I made some up below - you can exchange them for your real situation.

If you work a $50K/yr job @ 40 hrs/wk and 50 wks/yr: you are exchanging your time at a rate of $25/hr.

If you add an hour commute/winding down time a day you are working a 50K/yr job @ 45 hours/wk and 50 wks/yr: you are exchanging your time at a rate of $22/hr.

[YMOYL takes a similar approach, but also includes taxes, work clothes, work lunches, child care, transportation costs, etc.  If you do a careful analysis it could easily bring the hourly rate down to a depressingly low level.  Perhaps below $10/hr if you have significant work related expenses.]

I didn't quite get the numbers in your post, but I think that there would be about a $165/mo rent difference between the two apartments (10 (self assigned value)*0.75 (hr)*22(work days/mo)).

So assuming the apartment close to work is $1165/mo and the apartment farther is $1000/mo, you have to work:

Close: $1165/mo /$25/hr = 46.6 hrs of life for shelter/mo
Far:  $1000/mo /$22/hr = 45.5 hrs of life for shelter/mo

Of course, your (real) numbers will be different. 


expatartist

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Re: Rent money or time money?
« Reply #3 on: September 15, 2013, 07:56:29 PM »
@lentilman great calculation, thanks. We're moving to a cheaper (and more-enjoyable) part of town a bit further from my work. After using your formula, it looks like it'll even out in terms of commute time and savings, plus be a more enjoyable neighborhood to live in.

lentilman

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Re: Rent money or time money?
« Reply #4 on: September 15, 2013, 09:15:20 PM »

Nords

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Re: Rent money or time money?
« Reply #5 on: September 16, 2013, 12:05:55 AM »
I am at a crossroads with my soon to be wife...
I tried to be reasonable by insisting...
I am having a difficult time explaining...
I had a hard time even justifying...
I had a very difficult time trying to convince her...
P.S.  I actually tried convincing her...
I don't really feel there is any advice that is gonna sway the two of us in one direction or the other, but I thought that this would make for an interesting conversation.
I think it's going to make for an interesting marriage, too.  I wish you luck.

There's probably a reasonable compromise somewhere around the middle of those two positions. 

fuzzhead1506

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Re: Rent money or time money?
« Reply #6 on: September 18, 2013, 10:28:42 AM »
yes, lentilman!  I like that calculation of hours of life spent for shelter!  and I wrote the post with "the true cost of commuting" in mind (probably moreso than the others actually).

I feel that if there is a proper way to look at it, it might be to forego the luxuries in the immediate term - if only to save the money required to later afford the luxuries of retirement and time.  I came to this conclusion after having slept on the decision for an evening, and therefore, changed my mind about the living situation.  We decided to lease the cheaper place together, after all.  Sweat + blood + a purgatory like commute (not at all really ;) ) = earlier retirement (or the opportunity for twilight golfing at the REAL public course!!!).

An extra four miles on the bike is nothing quite like an extra 4 miles in the car.  Hopefully, the extra 45 minutes on the bike each day will pay dividends to my torso! haha

I am trying to come to grips with the interplay between the 5 (including lentilman's article) articles and I have tried to philosophize this into one cohesive argument without contradicting any one of each of these unique ideas.  Since biking is a priority, I have to start viewing it as free time instead of a commute, eh?  Even if we are travelling home from work, the bike provides extreme amounts of enjoyment and should be considered such.  However, there will be days when I get a flat tire - this will almost certainly make the bike feel like a commuting vehicle.  Hence, why I decided to assign $10/hr for the commute time - not $25/hr.

Thanks, Nords for the kind words! =)

I now realize how complainypantsy I sounded.  The conversation I had with my DFW was a little heated, but if I felt that marriage was too hard for me or that I didn't want to work toward relatively common goals with her, I would've become a monk and lived a truly Mustachian lifestyle as a priest!

I feel like the DFW and I are pretty good communicators and we both fight fair.  Our time together was what I was most worried about loosing through this (extra) commute, though.  Anyone else have thoughts about where your time with your best friend fits into this equation?  Even if your best friend is yourself?

When doing your own calculations does a commute really cost you $25/hr? 

fuzzhead1506

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Re: Rent money or time money?
« Reply #7 on: September 18, 2013, 10:48:33 AM »
For example... this paragraph really stuck out... but you are still getting to and from work and are likely not with your best friend:

But if you can walk or bike to work, it will cost you virtually nothing. And it also doesn’t count as using up your personal time because it is adding something that nobody except Olympic athletes is doing enough of anyway – exercise. You can take your time spent riding your bike ride directly out of time you would have otherwise spent in the gym, or waiting in the doctor’s office for prescription medication.

(from the true cost of commuting)