I have had a few conversations over this past year regarding extreme frugality, with a few people I know as well as a few in the media. 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 its just not worth our time to focus excessively on extreme frugality. Perhaps it’s often better to spend that extra time on improving one’s capacity to earn?
Back to the topic. 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!
Note: I originally posted this piece very soon after Squirrelers was launched. Given the blog’s increased readership, I wanted to revise the post a bit and revist this topic to get everyone’s thoughts
All good points, Squirrelers. Money *is* and represents time, your time that you spend acquiring this money. One of the reasons that I don’t make great use of coupons is that I can’t justify the time spent. Similarly, consider the time saved when shopping online at places like Amazon. If you know exactly what item you need, then it’s just a couple of mouse clicks versus a special trip to a particular store.
@101centavos – I know what you mean about coupons. While they can be very useful at times, that benefit must be weighed against the time spent finding them. If one spends an hour cutting, printing, organizing coupons – only to save $1.50 – that ROI of time should probably be considered. a fast food job could pay more per hour!
I love this post because it gives a rational balance to frugality. Our time really IS valuable, especially when one considers that it is in limited supply. The older I get, the more I realize this fact. This being said, I love going on yard sales with my wife and my daughter. I seldom buy anything, but the time is well spent (interesting phrase) because I enjoy “the hunt” and especially enjoy spending that time (there it is again) with my family.
Joe, you do bring up a good point. There are folks that really enjoy the “hunt” for a bargain. It’s almost like a hobby, or even a sport for some people. If viewed that way, I think it takes on a different meaning. What’s a fun hobby for some may not be so for others, and vice-versa. But if it’s truly a hobby and pastime, and a way to bond with family members, that’s different. Then, it’s the bond and the fun of the whole experience that can make for a fun time. I can totally understand that way of framing it up. You’re not doing it just for the small savings, as you realize it’s not necessarily worth it from that point of view. It’s for other reasons.
I absolutely agree. Although, I do think that some people get a thrill out of hunting for that super-awesome bargain. For these people, a great deal is their White Whale, a trophy to show triumphantly to the world. At this point, bargain-hunting becomes a form of entertainment and, hey, it sure beats a poke in the eye or a stab in the wallet.
Laren – echoing what I mentioned in my comment to Joe, I can totally see that view of it. If someone spends a lot of time and effort hunting for a bargain and gets one, it may be worth it from a purely entertainment point of view. To actually spend 3 hours driving around to spend $2 may be a low ROI investment, but if someone looks at it as a hobby…..well, I have to agree that there are much worse things that could be done instead!
Hello Squirrelers!
Very interesting article. I love stretching my brain and thinking about frugality in a different way. It’s weird, but as I get older, I am having a healthier view of my time–as in what I am willing to give up my time for, and what I am not willing to give my time up for.
Amanda – it’s often fun to reframe things and try to see them from a different perspective…..and our attitudes toward money can be a big part of that. I’m learning different ways to view things as I get older as well.
HA! I have to bring up the age old argument of what else would I be doing at that time?
So at 9pm, I’m surfing the net to find a good deal on a 30mm canon lens and may save a few bucks. It’s a good use of my time because otherwise I would be playing video game or reading or something else that won’t be making any money. (or updating my currently no ad blog)
I count that as leisure time.
Retire by 40 – Hey, if it’s true leisure time, then whatever floats your boat!
Ah, marginal benefits. 🙂
We fool ourselves into looking at relative prices, rather than absolute prices. Someone once did a study asking people if they could buy a new car for $25,000, would they drive across town to buy the same car from a competing dealer for $24,900? The answer was overwhelmingly no – why bother, just to save <1/2%?
They then asked people whether they'd drive across town to get a free pair of $100 concert tickets. You can probably figure out how people responded.
One more thing: people who work uncompensated overtime are insane.
Greg – it’s remarkable how people would react so differently to different situations that involve the same dollar amount. It’s all in how it’s framed. It’s important to cut to the chase and be able to figure out the tradeoffs involved in situations, and not let the background noise affect how you perceive a situation. $100 is $100. Period.
I am a big user of coupons. However, a great deal of my work is done for my by couponing/saver blogs. if I can read their list, follow what they do, and save $75 or more on groceries I would be nuts not to. My pantry and freezer are stocked full of free food. Now keep in mind I am a SAHM and we don’t have much money. This is how we get by. AND when it comes time to just grab some things that we need I realized a long time ago that stopping to search for who has the best price for bread or whatever is nuts and to just go for what is close.
My dad raised me to think about this: Imagine you are getting paid for that hour. Is it worth the time? Just like you said. If you could make $25 that hour…. and in these cases, yes. I save more than $25.
Kirsten, I’m a believer in the approach your dad had, with thinking about being paid by the hour. It quickly helps frame up whether something is a good use of time or not. By the way, if you’re saving more than $25 per hour in this way, that’s great!
I’m too lazy to spend much time on anything I don’t love. We deal-hunted online for the best laptop for our needs a few weeks ago…it took half an hour and another half an hour to drive to Office Max and back with our puchase, lol. Could I have found an even better deal eventually? I don’t know, but I do know that we are happy with our purchase and it was a good deal no matter how you look at it. 🙂
Crystal, I have foundt that there are times when I just decisively bought something without thinking about searching all over for price comparisons – and I was really happy with it. I realized I might have gotten a better deal if I really searched, but I was happy anyway. One of those purchases was also an Office Max purchase – a desk. I had that thing for $10 and got great mileage out of it. It wasn’t a purchase that took long to make, either!
I totally agree with you Squirrel, sometimes the savings just isn’t worth it. Sometimes I am just plain lazy and grab a 5 dollar pizza from Little Caesers, cut up some fruit and veggies and slap it on the table. I am sure it might be cheaper (or maybe not) to make that pizza, but I value my time immensely. Now, if it is family fun time to make pizza, then it is more a hobby.
I view coupons the same way. I actually enjoy clipping coupons, and it is no problem for me to file them when I am waiting for a miscellaneous child to finish up practice.
If it is drudgery though, I won’t do it to save a little extra.
Everyday Tips – at $5 a pizza, you’re probably not spending much more than it would have cost at home. Totally worth the time. By the way, I got a chuckle out of the “miscellaneous child” comment:)
I’ve fallen into this trap a few times. It’s easy to get caught up in a money-saving idea and not think about anything else. Fortunately I’ve had a few of those “why am I dragging my family all over town on a Sunday to find the best deal on bubble wrap” moments to snap me out of it.
Now I try to go for the path of least resistance savings tactics. For instance, doing a quick search for online coupon codes before buying only takes a few extra minutes.
Lindy – that’s a funny descriptor, trying to get “the best deal on bubble wrap”. My moment was involving a discussion over driving 5 miles and spending an extra 30 minutes total to save $1 on Desitin for a baby. It quickly hit me how insane and laughable that was. Needless to say, I paid the $1 premium and saved my 30 minutes.
Great post and great discussion!
This is my very favorite quote from ‘Your Money or Your Life, “Frugality is enjoying the value of getting good value from every minute of your life energy and from everything you have the use of.”
I had a high paying job that I worked many hours at. To make this money I had to spend money on babysitters, cleaning staff and take out food (and not saving a dime!). Not a bad thing but when I stopped and looked at my life I realized I was off track from where I wanted to be.
Molly – thanks! Glad you like the post and discussion. You know, I think that there are many folks who have done what you described, making money yet spending a lot money to allow them to make that money in the first place. You get what I’m saying:)
Yes saving money can cost you. The question you need to ask yourself is how much are you saving and could I work more and make more by spending a little more than do it. If I can work an extra two hours by having food delivered then the food is cheap.
I’ve been thinking alot about frugality lately and had a sudden revelation the other night about putting the “YOU” back into frUgality…For me the limits to frugality become questionable when I am no longer having any fun, or it becomes all about the $$ and not about me. If I become lost in the quest to save a nickel then it’s no longer a valuable quest. I am working away at this topic in my head, soon to become a post on my blog.
Great artcile. Sometimes being frugal and trying to save is just not worth it when it comes to the concept of time. Do we really save by spending more time driving, shopping, waiting? Sensible frugality is a way to go.
I’ve had the same thoughts as you, squirrelers. I don’t see the point in spending a lot of time just to save a couple of bucks here and there. To imply that spending the extra money is always a waste is also to imply that the time spent is worthless. There’s always an appropriate balance to be found.
Invest It Wisely – Yep, spending lots of time to save a few dollars isn’t always sensible. That’s why we try to earn money! Though I do understand the thrill some people get from saving, where it’s not just the actual saving or ROI of time that they’re thinking of, but the sheer thrill of saving a few bucks. To each their own, right?
Definitely on the mark here. I think the best idea is to come up with an hourly rate that is worth it to you, remembering that savings are not equivalent to pre-tax earnings. ($10 earned, you pay taxes on; $10 saved, you don’t.) Then, only undertake frugal tasks that are worth your hourly, and ignore ones that fall below.
My only objection to this article is the calculated marginal hourly. I like the “real” hourly suggested in “Your Money or Your Life”, where you figure in all of your work costs to figure out how much you really are earning per hour. That should be taken into account in these calculations sa well.
That said, I haven’t settled on my hourly I’ll live by! I do wash ziplocs, but I refuse to drive to a farther store for a slightly better deal. Guess I better start calculating…