The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: darkadams00 on April 05, 2014, 11:41:24 AM

Title: What is your time really worth?
Post by: darkadams00 on April 05, 2014, 11:41:24 AM
Numerous discussions about DIY, bike commuting, investing etc. include opportunity costs as a key argument--what else could I be doing or where else could I be investing that would be more productive than the option I am considering right now? The "pay off the house early" conversation gets heated quickly because people have different backgrounds, personalities, risk tolerance, and financial acumen. However, several threads here and elsewhere online end up with the same conclusion--it's a choice that is decided by emotions, financial rationale, or some combination of the two. I understand both sides of that topic and why different folks would choose either side.

My question now is this--Do you really consider the opportunity costs of your time when you undertake recurring tasks, such as doing a DIY project, clipping coupons, mowing your own lawn, changing your own oil, or commuting by bike? Several personal finance authors write that earning $X.00 per hour and paying $Y.00 for someone else to do a task for you is better for you to reach your financial goals if the numbers work. Personally, I find that rationale expressed more often in books than in the practice of most of my family and friends. Most folks I know do what they want to do or know how to do and pay for what they don't want to do or don't know how to do. Opportunity costs for an hour's "lost" earnings or an extra hour spent with the family on Saturday don't come into the decision-making process in reality.

With that said, Mustachians seem to think different than many of my acquaintances, so I just wanted to hear what the group here had to say.

Disclaimer--We bike commute/shop regularly, my wife clips coupons, I do occasional DIY projects, and we manage all of our household tasks weekly/monthly except for company-discounted car maintenance.
Title: Re: What is your time really worth?
Post by: warfreak2 on April 05, 2014, 11:52:47 AM
Different hours have different values. I have a pretty nice hourly wage at my job, but it's not a liquid market, in the sense that I can't just sell as many hours as I want at that price. A university will pay me to teach during the daytime, during term time, and students will pay me to tutor in the evenings, mainly during the exam period. However, nobody will pay me very much for an hour at 4AM.

Compare with real-estate: houses in London sell for a lot more than houses in other places, and even the location within London makes a big difference. Daytimes in October-March, and evenings April-June are my prime real estate, but it would be silly to pretend that the rest of my hours are worth that much too. Like everything else, my time is worth what somebody will pay for it, and most of it is in low demand.

TLDR: opportunity cost is very low if there isn't actually a valuable opportunity.
Title: Re: What is your time really worth?
Post by: Greg on April 05, 2014, 11:55:50 AM
I'll answer that I don't often think about that stuff.  I do what I enjoy, and try to avoid what I don't enjoy.  A good example is lawn mowing.  I pay a friend's kid to do our grass, of which there is plenty.  We live in the country and have a bit of land, but we don't water or weed it or anything like that.  Over the years we've reduced the mown areas and let the chickens and goats handle the non-mown areas as needed.

Back to the mowing... I have bad grass allergies and it really is hard on me to mow it.  I'll tackle it if it gets out of hand and the kid isn't available but the ill affects last days.  So I'm happy to pay the kid to do it.

On paper my time is $75-$100 per hour as a designer and builder, but there are overhead costs in that.  I spend a lot of time fixing my vehicles for instance, but not so much as to save money as because I enjoy the challenge.  A lot of it is troubleshooting that I truly enjoy.  The sense of accomplishment after completing a project is worth more to me than the missed opportunity cost.

Another reason is I have certain things in mind and certain expectations as to quality, method and aesthetic results and so find it easier to do it myself than to spend a lot of time policing someone else's work.
Title: Re: What is your time really worth?
Post by: Emilyngh on April 05, 2014, 11:58:37 AM

Several personal finance authors write that earning $X.00 per hour and paying $Y.00 for someone else to do a task for you is better for you to reach your financial goals if the numbers work.

This assumes that you could and would be paid X for that hour and that you couldn't/wouldn't make this money up at another time.   Eg., it doesn't matter that I make "$50 an hour" if I'm salaried and if no matter how many lunches I skip to free up that time, I'm not getting paid for that time.   And even if one is paid by the hour, unless they really are turning down work to DIY, there is no opportunity cost.   IME, the whole "my time is worth X" argument is usually just a way for people to try to rationally justify something that they just emotionally don't want to do.   Very rarely is one really missing out on earning potential that they really would utilize.

Now, if one argues that they would rather spend the time with their family instead of DIYing, they really are otherwise short on time to spend with family (eg, not wasting it watching tv), and take into account how much longer they have to work (and thus lose family time then) to pay for not DIY, then this is a different argument.   Although, IME, the average middle/upper-middle class American could have plenty of family time while still DIYing if they prioritized things differently and lived more simply.
Title: Re: What is your time really worth?
Post by: Cheddar Stacker on April 05, 2014, 12:01:32 PM
I see your side of the argument for sure, but 3 things come to mind as counter-points:

1) As warfreak2 sort of pointed out, I make hefty hourly wage at the day job, but I don't equate that to my time at home. No one would pay me this wage to mow their lawn, fix a faucet or mop their floors.

2) A dollar saved is better than a dollar earned since you don't have to pay taxes - fed, state, medicare, social security, maybe sales tax depending on what you spend on. An earned dollar might only be worth $0.60 if you are in a high tax bracket. This madfientist post comes to mind, specifically the spending section toward the top:

3) I get great enjoyment out of DIY stuff. I'm fairly handy, like to build stuff, enjoy being outside working even when its 95 degrees. Work pays the bills, but the manual labor I do at home keeps me sane.
Title: Re: What is your time really worth?
Post by: ender on April 05, 2014, 12:04:06 PM
Some of those are considerably more complicated and not strictly "time vs money" calculations.

For example I would LOVE to be able to bike to work [life circumstance currently prevents this daily... bleh] and even if it took longer, it actually would still be a net benefit on my life. Let's say my commute is 15 min by car and 30 min by bike. I am "paying" 30 minutes a day of time to save 30 min driving. However, I am also "paying" that 30 min time to get 60 min exercise a day, which has other benefits on my health/energy levels/etc.

Most of these calculations on opportunity cost or value of time miss this component, which, granted, is very difficult to estimate or factor in.
Title: Re: What is your time really worth?
Post by: CarDude on April 05, 2014, 12:22:58 PM
Free time is precious. If I enjoy it, I do it. If I don't, I don't. It's worked for me for a few decades now.
Title: Re: What is your time really worth?
Post by: Thegoblinchief on April 05, 2014, 08:35:31 PM
If you're working so many hours a day that you lose money by fixing things around the house or riding the bike, you have far more serious problems.

I like DIY. Sometimes it saves me money. Frequently it doesn't. But the job is done RIGHT.

I hire out only when I am paying for superior skill I can't possibly emulate in a reasonable time, or it's an emergency and needs fixing right effing now.
Title: Re: What is your time really worth?
Post by: Milspecstache on April 05, 2014, 09:36:41 PM
My day job is primarily a desk job.  I do have opportunities to go out and I use them to the max extent but regardless when I am at home I want to physically accomplish tasks. $0/hr as I do it for fun/escape.  Allows me to justify doing jobs that require expensive material/tools.  If I priced out my labor I'm sure many would come back as better for me to hire it out.

Another benefits is it forces me to do manual labor which is very similar to exercise!
Title: Re: What is your time really worth?
Post by: Nords on April 05, 2014, 11:41:17 PM
Free time is precious. If I enjoy it, I do it. If I don't, I don't. It's worked for me for a few decades now.
Same here.

Some neighbors will let me help them with occasional repairs and they only feel obligated to drop off a nice holiday omiyage.  Works great for us.  Others are more comfortable paying me for more frequent visits, in which case I'm $25/hour or an exceptional main dish/baked good.  I should probably raise that hourly rate but it's been several months since the last call.

I hate having my time wasted, so some of my own tasks are DIY just because the alternatives have more hassle:  oil changes, rental property maintenance. 

I enjoy a workout, but I can't do surfing or bodyweight exercises every day-- so yardwork fills in the gaps.  I prefer to lift heavy objects and climb steep slopes rather than hiring someone to do it for me.  I also enjoy doing most handyman mechanical, electrical, and plumbing repairs/chores.  I'll hire out heavier carpentry and drywall (I don't practice the skills often enough) but I can handle most finish work and painting.

I dislike some tasks and try to hire them out:  housecleaning and mowing the lawn.  When our housecleaner is indoors working her magic ($35/hour), we're outdoors doing the yardwork or other heavy projects (which could have cost $50/hour or higher).  Luckily my spouse enjoys mowing the lawn, and it only needs cutting 3-4x/year.

Some chores I just plain don't do and don't care to hire out, like washing the car.  By the time I get around to cleaning out the sand from it, I'm more likely to use a shovel than a vacuum cleaner...
Title: Re: What is your time really worth?
Post by: dcheesi on April 06, 2014, 05:53:34 AM
I'm sure everyone here has read this, but just for completeness:

I'm on salary, so I don't get paid for extra time. I suppose I could start a freelance business on the side, but honestly after 40 or more hours of work in my field, the last thing I want to do in my spare time is more of the same. Plus it's a desk job, so I need the exercise (or simply time not on my butt) that housework provides.

Unlike MMM, I don't harbor any hopes of becoming proficient enough to sell my services doing home improvement. I'm just too clumsy and slow to learn physical skills. But I do like knowing that I can do these things for myself if I have to, even if it might a bit longer and come out a bit crooked...