I have had a few conversations lately with people I know, as well as several in the media, regarding extreme frugality. Some examples that I see are inspiring, many are entertaining, and some just way out there and over the top. Some, as I have alluded to, cross the line by taking advantage of others or causing one to lose self-respect. So, there is a spectrum when it comes to extreme frugality, ranging from very good to very bad.
That said, stripping away the inspiration, entertainment, and morality issues related to some of these tactics, a key question remains: Is it worth the time? Is it worth going to extreme measures to save money – even pennies – when it costs time to do so?
This is where it appears many people are not fully thinking through the value of their time. I have certainly fallen into that at times, and I’m guessing we all have at one time or another. Its important to keep in mind the value of our efforts in terms of the precious time we spend on such time saving efforts.
To illustrate, lets take the example of a person with the following hypothetical employment situation:
Wages: $50,000 annual salary
Work Day: Standard 8-hour day.
Days Worked: 250 days per year (factoring in 5-day workweek, plus holidays/vacations)
For this person, his total imputed hourly rate is $25 ($50,000 / (8*250)). Thus, before taxes and other deductions, this person sells time to an employer at a rate of $25 for every hour on the job.
Lets say that this person’s employer came back to him and said that they wanted him to work overtime on a special project. This project would not lead to a better performance review, nor would it provide a leg up for promotion. Additionally, it wouldn’t provide experience that could benefit your career, nor would it impact his job security. All this said, the employer would pay him $5 if he spent an extra hour working on this project each week.
Would this employee, who normally gets paid $25 per hour, jump for joy at the possibility of making $5 more if he works that additional hour on this non-value added special project? I suspect that this employee might evaluate this, and think: “Why should I get paid $20 less – or 20% of my regular pay – to do this? It’s not worth my time!“
Its something to think about as we spend time devising ways to save money.
Is it worth $5 to spend an hour round trip, to shop at a cheaper grocery store?
Is it worth $5 to spend an hour driving to buy that printer that’s cheaper at the store which is a 20 mile drive from here?
Is it worth $5 to use that coupon to buy a new pillow at the store in the next town over, when I could spend just buy it at the store right around the corner?
Is it worth $5 to hunt for bargains online for an hour, when I could just go to the site I know and buy my product in a matter of minutes at the price offered?
When you frame these “savings” in terms of opportunity cost such as in these examples, it provides another perspective on frugality: Sometimes it not worth our time to focus excessively on extreme frugality.
Of course, I’m presenting this as a purely dollars and cents argument here. Sometimes people feel great pride in finding a bargain, and take on frugality as hobby – the thrill of the chase. In that way, if it works for someone, so be it:) Its also understandable that if frugality becomes a habit – a way of life – then this mindset can provide benefits in other decision scenarios.
I’m all for sensible frugality. It’s a great practice! That said, on an individual case-by-case basis, its worth thinking about the value of time when trying to save money. Every little bit helps, but if it costs us all of our time, it makes sense to re-evaluate that investment of time. Because while money can always be made, new time can’t be made!