One reason (time == money) is simplistic

[igthebold]

I'm a consultant who bills hourly, so in many ways, my job is about as time == money as you can get. I can work more hours when I want, I can work fewer hours when I want. Pretty cool in some ways, frustrating in others. I recently went through a short experiment with "sell all the tools, outsource everything!" I've come full circle to a more DIY perspective and thought I'd share an insight I've come to.

Yes, I can do enough work in a N hours to pay for a task, like mowing the lawn, but I've realized that it's not as simple as making one extra hour. If I have to make one extra hour of money, I have to set up a contract that requires a lot more than just one hour.. it requires the rest of the contract for one thing, it requires the overhead of running and finding business.

In other words, that one or two extra hours of work is chained to many other requirements. It's truly much more nimble to do it oneself and be done than to work an hour that is committed like that.

Any other ways people oversimplify when they say time is money? I ask because I'm really trying to train myself away from the "outsource everything" mindset permanently.

[arebelspy]

Many here agree you shouldn't outsource everything (or even most things, or maybe almost anything).  But that's a separate issue from time == money.

Simply due to the fact that there are other requirements doesn't mean you can't try to equate the two via an hourly wage, it just means you need to count those other requirements in your total summation, not just the hours you work, but the hours you work to get the work (like you say).  Those things exist, but they don't make it so you can't equate time and money, they just need to be accounted for.

[tooqk4u22]

This is basically the same as the should I pay off my mortgage or invest argument.  The reality is you would never take a contract for just one hour unless maybe it was an accomodation for an existing client, in which case the effort wouldn't be that much.  Conversely while you cut your lawn one hour a week it is likely that you will need to do it several times in the summer (read several hours of work).  Assuming an hour worked on a contract equals an hour worked on DIY stuff (not real leap here right :)).... then it comes down to opportunity cost.  If you clear $65/hour (has to be clear because lawn care is not tax deductible so you are paying with after tax dollars) and it costs you $25 to pay to have someone do it then working more hours is the absolute right choice from a financial perspective.  Also in some cases contractors can buy materials cheaper than you can.

Ohhhh..I get it, but where is the catch.  The catch is somewhat the same as the mortgage question.  For instance, my pay rate is higher than what I could pay to have the lawn done....but you know what...I don't work 24/7 right now...I almost always have at least 30 minutes throughout the week that generally available (kids are sleeping, at a party, playing in the yard)that would otherwise be spent watching TV or something.  Sometimes I cut the front one day and the back another day.  Point is that in this available 30 minutes I am not making anything from my job....so is there really an opportunity cost. 

Either way you go is fine, but if you have free time that is unproductive the the DIY is better.

[arebelspy]

This is basically the same as the should I pay off my mortgage or invest argument.  The reality is you would never take a contract for just one hour unless maybe it was an accomodation for an existing client, in which case the effort wouldn't be that much.  Conversely while you cut your lawn one hour a week it is likely that you will need to do it several times in the summer (read several hours of work).  Assuming an hour worked on a contract equals an hour worked on DIY stuff (not real leap here right :)).... then it comes down to opportunity cost.  If you clear $65/hour (has to be clear because lawn care is not tax deductible so you are paying with after tax dollars) and it costs you $25 to pay to have someone do it then working more hours is the absolute right choice from a financial perspective.  Also in some cases contractors can buy materials cheaper than you can.

Ohhhh..I get it, but where is the catch.  The catch is somewhat the same as the mortgage question.  For instance, my pay rate is higher than what I could pay to have the lawn done....but you know what...I don't work 24/7 right now...I almost always have at least 30 minutes throughout the week that generally available (kids are sleeping, at a party, playing in the yard)that would otherwise be spent watching TV or something.  Sometimes I cut the front one day and the back another day.  Point is that in this available 30 minutes I am not making anything from my job....so is there really an opportunity cost. 

Either way you go is fine, but if you have free time that is unproductive the the DIY is better.

I have no idea how working more hours and outsourcing versus insourcing is related to paying down your mortgage and investing.  I feel like maybe you tried to explain it, but I did not follow, at all.

Can anyone else explain for me?

[velocistar237]

Many here agree you shouldn't outsource everything (or even most things, or maybe almost anything).  But that's a separate issue from time == money.

They're very related. If your time is worth $50/hour, and you can pay someone $20/hour to mow the lawn, why wouldn't you? It's because the reality is more complicated than saying that your time is worth $X/hour.

I see time vs. money as inter-related supply and demand curves for different activities. If you do one thing for too long, you'll want to do something else. I couldn't work at a job for 80 hours/week, even though if I did, I could outsource a lot more.

This should be a "continue the discussion" thread.
http://www.mrmoneymustache.com/2011/09/13/domestic-outsourcing-practical-or-wussypants/

[arebelspy]

Many here agree you shouldn't outsource everything (or even most things, or maybe almost anything).  But that's a separate issue from time == money.

They're very related. If your time is worth $50/hour, and you can pay someone $20/hour to mow the lawn, why wouldn't you? It's because the reality is more complicated than saying that your time is worth $X/hour.

Sorry, you're right.  I meant it's a separate issue from what the OP's main arguemtn was, that there are other costs of finding the job, completing it, etc.  I just think he isn't calculating it correctly.

But any arguments for/against outsourcing are separate from that issue.

What I mean to say is that MMM's article is a different issue (and worthy of discussion) from what I understood the OP to be saying.  And I still have no idea what tooq is going for, but that could just be me.

[igthebold]

I see time vs. money as inter-related supply and demand curves for different activities. If you do one thing for too long, you'll want to do something else. I couldn't work at a job for 80 hours/week, even though if I did, I could outsource a lot more.

This is definitely another factor. Recently I tried working more hours per week to save more, but in the end I just felt the burn-out coming on.

Sorry, you're right.  I meant it's a separate issue from what the OP's main arguemtn was, that there are other costs of finding the job, completing it, etc.  I just think he isn't calculating it correctly.

Could be. My primary realization had more to do with the fact that one hour of revenue can't be isolated cleanly.. Maybe my thinking isn't clear though, evinced my my writing not being clear enough. :)

[tooqk4u22]

I have no idea how working more hours and outsourcing versus insourcing is related to paying down your mortgage and investing.  I feel like maybe you tried to explain it, but I did not follow, at all.

[/quote]

Not saying that they are the same thing but the thought process is similar. Simply saying that from a purely financial perspective there is usually a clear choice (paying off your mortgage with todays rates makes no sense financially as investment returns, even conservative ones, for a long term horizon combined with paying off fixed mortgage payments in inflated dollars will win but a lot of people would rather pay off their house.......paying a landscaper $25/hour when you clear $65 is a no brainer especially if you work a lot).  However, these decisions are usually made emotionally.....I sleep better at night knowing my house is paid for......I cut my lawn because I just don't want to work another hour at my job or any other job.....I would rather play with my kid than cut the lawn......maybe I like cutting my lawn.

Again it is similar because it is a financial question that usually gets turned upside down because of non-financial variables. 

 

[tooqk4u22]

They're very related. If your time is worth $50/hour, and you can pay someone $20/hour to mow the lawn, why wouldn't you? It's because the reality is more complicated than saying that your time is worth $X/hour.

I see time vs. money as inter-related supply and demand curves for different activities. If you do one thing for too long, you'll want to do something else. I couldn't work at a job for 80 hours/week, even though if I did, I could outsource a lot more.

This is part of the point I was not so clearly trying to make...there are other non-financial variables that come in to play, in velocistars case it would be not working in one place more than 80 hours.   

[arebelspy]

Sorry, you're right.  I meant it's a separate issue from what the OP's main arguemtn was, that there are other costs of finding the job, completing it, etc.  I just think he isn't calculating it correctly.

Could be. My primary realization had more to do with the fact that one hour of revenue can't be isolated cleanly.. Maybe my thinking isn't clear though, evinced my my writing not being clear enough. :)

Ah, I gotcha.  I agree it's difficult to isolate it cleanly.  I still think you can calculate your hourly wage, you just need to take those "extra" things into account

I do agree with velocistar's point that that once you've calculated that, it's not a simple, straightforward "outsource anything that would cost less per hour than my hourly wage."

Not saying that they are the same thing but the thought process is similar. Simply saying that from a purely financial perspective there is usually a clear choice (paying off your mortgage with todays rates makes no sense financially as investment returns, even conservative ones, for a long term horizon combined with paying off fixed mortgage payments in inflated dollars will win but a lot of people would rather pay off their house.......paying a landscaper $25/hour when you clear $65 is a no brainer especially if you work a lot).  However, these decisions are usually made emotionally.....I sleep better at night knowing my house is paid for......I cut my lawn because I just don't want to work another hour at my job or any other job.....I would rather play with my kid than cut the lawn......maybe I like cutting my lawn.

Again it is similar because it is a financial question that usually gets turned upside down because of non-financial variables. 

Ahh, another light bulb moment.  Yes, they are both financial decisions with non financial implications as well.  I would say though that there are many more positives to insourcing than there are to paying off your mortgage.

[tooqk4u22]

Ahh, another light bulb moment.  Yes, they are both financial decisions with non financial implications as well.  I would say though that there are many more positives to insourcing than there are to paying off your mortgage.

Well written, you are true gentleman.  But your is not always correct.  If I have a stash then it is usually the correct view, but if I don't then it makes more sense to maximize my income so that my stash can grow.   Additionally, some people don't have the skill/tools/whatever to do certain DIY projects and it would cost them far more if they did.  I DIY just about everything, and you know what sometimes it is not the right financial choice whether because of the hourly rate equation or the skill/tools equation but I usually learn something and maybe it will save me money the next go at it.

[AJ]

Ahh, another light bulb moment.  Yes, they are both financial decisions with non financial implications as well.  I would say though that there are many more positives to insourcing than there are to paying off your mortgage.

Well written, you are true gentleman.  But your is not always correct.  If I have a stash then it is usually the correct view, but if I don't then it makes more sense to maximize my income so that my stash can grow.   Additionally, some people don't have the skill/tools/whatever to do certain DIY projects and it would cost them far more if they did.  I DIY just about everything, and you know what sometimes it is not the right financial choice whether because of the hourly rate equation or the skill/tools equation but I usually learn something and maybe it will save me money the next go at it.

Oh, I just got it! I was scratching my head over the connection between insourcing and paying the mortgage early for a bit, but I get it now after reading this - they are both maximizing accumulation, mathematical strategies.

The only reason I can think that the two may be different for folks in the "accumulation" phase is that it takes a while to learn certain DIY things (whereas, the warm fuzzies of paying off a mortgage don't take time to learn). However, things like doing dishes and mowing a year don't really fall into that category. Also, as velocistar mentioned, many (most?) folks can only do the same thing for so many hours a day before it becomes miserable. I suppose that would be akin to folks sleeping better without any debt, but that may be stretching the analogy.

I wonder what other things might be optimal for one phase, but sub-optimal for another...

[velocistar237]

I still think you can calculate your hourly wage

It's easy to figure out at the job level, but it's hard to pin down what you consider any particular hour or activity to be worth to any precision.

This is the best write-up I've seen on the topic:
http://marginalrevolution.com/marginalrevolution/2010/01/whats-the-value-of-your-time.html

"The key question is whether the overall pattern of your time is an enjoyable one and marginal calculations aren't always a good way to make that estimation."

[Rich M]

Time is money is from a movie with Michael Douglas.

It can be simplistic or not.

.... time is money when you have a business that pays rent every month, ...or internet, or utilities, or anything that is a regular payment that is dependent on time. 

Whether you are in a business or not, if you have these depreciating liabilities and are not utilizing them to make you money, or provide a service, they are a waste.

Here are a few examples of time is waste of money.

--paying rent on a storage unit that has depreciating items in it.
--having a car that you don't use.  <--that is me!
--owning a vacant vacation home. ( not necessarily depreciating but a tax and maintenance  liability)
--Having a more expensive car than you need that is not one that you don't use.
--owning a camper that you rarely use...and a boat too.