Budgeting money is a key concept that everyone in life, whether you are rich or poor, young or old, should understand and practice. We all might have different systems that we use, but at least by budgeting we can all be aware of how much we save and how much/where we spend our money. The forgotten part of this (because most people do not even make it this far) is that time is even more valuable than money. We sometimes spend so much time on things to save money, yet it is taking us more time to do the thing that is saving us money. This is backwards thinking! The reason this is a such a hard concept to grasp is because we do not put a dollar value on our time. It seems too planned and not fun. In this article we want to show you why this is not the case and why you should do this and how. Let’s first look at some of the ways you might be thinking you are saving money, but might be really costing you time.
Coupons- This could get into a whole other topic on whether coupons actually cause you to spend more or buy things you would not normally, but to spend any more than 10-20 minutes looking at coupons you probably will need to be saving at least $5 on your trip to make it worthwhile.
Sales/Deals- If you spend one hour looking to find the best deal on something your savings should be at about $10, but closer to $15. While it is fun to find the best deal and the search is sometimes just as much fun as the actual purchase, unless you are saving hundreds on a big purchase, spending anymore than an hour or two looking for the best deal probably is not the best use of your time. Big ticket purchases would be the exception for this. Roughly anything over $1,000.
Credit Card Rewards- This may be controversial, but there are definitely rewards systems set up that are not in your best interest or that are designed to make you spend more. Some people spend so much time trying to maximize or find the perfect reward setup, but many times it is just to get a few dollars back. For example, if you spend $1000 in a month and you get 2% back that is $20. If $20 is going to change your life then there are other things that we should be focusing on. If you spend $5,000 in a month with 2% back you would get $100. That is a pretty substantial amount, but to spend that much probably means you are either putting everything on one card, made a big purchase which may or may not be common, or your income and spending is just that high which would go back to our earlier point that $100 should not matter that much to you.
Part Time Jobs- We live in the age of side hustles and part time jobs. While some of these can be very beneficial, do not just think because you have a 2nd job and you are bringing in money that that is the right use of your time. If you make at your full time job lets just say $20 an hour and your part time job only pays $10. If you work that job 15 hours per week for those 15 hours you are cutting your worth in half. If you can do more at your full time job, or build your skill-set to get a raise to offset the part time work, doesn’t that seem like the better long term solution? Maybe you need the extra income now, but very few people want to work full time and part time unless it is on something they like or would already be spending time on.
Shopping closer vs farther- Convenience. Sometimes it is a blessing and sometimes it is a curse. This one is definitely more of a personal preference and sometimes it is hard to judge what someone else thinks is convenience. You pay more at stores like CVS/Walgreens and gas stations its just a fact. Maybe the haircut place 20 minutes further away is $10 cheaper. Is it worth it for you to drive 40 extra minutes there and back to save $10? That does not seem like a good trade off. If you are in a store and really need to buy something and the place you normally go you wont be able to go to in a few days, do you pay the extra to get it now and cross it off your list or do you wait to go to the cheaper place? There are are so many ways to look at this, but basically don’t judge someone else so easily if they spend more on convenience because if they calculated their time saved, it may have very well been the best decision.
These are just a few common examples although there are many more we could list. So how do you calculate your time? Well the easiest way if you are paid hourly is just to take what you make an hour and start to think of tasks or your time not working and compare it to what your hourly rate is. If you make $15 an hour, spending an hour to save $15 isn’t terrible, but you basically broke even and now you can’t get that hour back. You could argue you are saving time to not work in the future, but you need to be okay with that trade-off still too. Let’s say you were looking for the same deal as the other example and spent only 15 minutes instead to save $5. Sure you lost $10, but you gained back 45 minutes of your time to do something else. That is the kind of trade-off we all need to be thinking of. Just because it saves you money does not mean it was the right thing to do! Remember time is more valuable than money. If you are salary you can calculate the value of your time a few different ways, but for easy math lets say you make $50,000 a year and average a 40 hour work week. Here is a simple formula. Salary/2,080 (40 hour work week in 52 week year)= Hourly Rate. So if you make $50,000 you would divide that by 2,080 and you would come up with a value of $24 for an hours worth of your time.
We challenge everyone to do this simple calculation. Knowing this information is so powerful! It will make you think twice about taking extra work or doing things that take away from your time that you do not enjoy. We are also not saying you need to be always calculating every hour of every day. Somethings you are just going to do because you enjoy them, it is the right thing to do, it is necessary, etc. For those things that you do not enjoy, things that you can shave time off or to find more time to do the things you love, this is where knowing the dollar value of your time matters. If we are going to burn ourselves out working to make money and loose all of that time, why would we not look at our time spent and make sure it is going to the things we love and want to do?