People have to make decisions all the time...
Say you earn $30 per hour at your day job, and could have additional work at $30 per hour if you wanted it. Let's pretend there are no taxes/benefits impact. If you had tasks at home (car maintenance, landscape maintenance) that you could hire out at $15 per hour, if you hired it out and worked 30 minutes to pay for an hour of landscape work needed, you had no financial impact of your decision and gained 30 minutes of free time. Seems in this case, unless you hate your job or receive intangible joy from doing landscaping yourself, it would be better to hire someone and enjoy your gained 30 minutes pursuing other pleasures. (This assumes the person you hire can do the job well!)
Same scenario, but you have plumbing work need and the plumber charges $90 per hour labor. It seems if you are up to the task and can perform it with the same quality and only a little slower than a plumber could, it may make sense to do this yourself (as you are 'earning' a rate greater than your marginal rate at your job). Even if the plumbing job takes you 2 hours vs the plumber's 1, you 'earned/saved' at a $45 per hour rate.
Now this is a little more difficult to conceptualize for those on salary or do not have the ability to directly take additional hours at their day job. Even though I cannot directly work more hours to get more pay, I still establish "what is the value of the time I spend outside of work?"
The first 2 scenarios above are about hire a pro vs DIY decisions. This analysis is something I naturally think of. Where I think about it less is in some of the following scenarios.
I want to buy a $100 item. I spend 10 minutes a day for 6 days searching the internet and trying to find a good deal. On day 6 I find it for $90 and buy it. I saved $10 but I spent an hour of time and only 'earned' $10 per hour for that effort.
I buy 1 $500 plastic card (4 minutes); set the pin (1 minute); go to another store and convert the plastic to paper (10 minutes); fill out the paper and deposit it in an ATM (5 minutes). If I receive a gain (in points, miles or cash back) which I value at $10 but spent 20 minutes, my earning rate is $30 per hour (at the break even point so maybe this is not worth it.) This is where scale comes into play. If I can scale this process by 5x in about the same amount of time, now the hourly savings rate looks much better.
Sometimes this logic does not work well for me. If I have the opportunity to save $0.50 by performing a task that takes 30 seconds, but there is no ability to scale it, I often will not do this (even though the hourly earnings/savings is pretty nice). Also, while I neglected taxes and benefits impact in the scenarios above, in real life these factors do exist, so $22/hour 'saved' may be more equivalent to earning an extra $30/hour in reported income.
Do other people consider the hourly savings/earnings rate when making decisions about: DIY vs hire it out; MS/AOR schemes; couponing; etc...? Are there other twists/adaptations of the logic that you use? I would love to hear from some others about this topic.
"Do I do this task myself or hire it out?"
"Do I take this extra time to save money (or make money)?"
Do you have an assigned (or in your head) marginal $ per hour rate which influences what things you do/don't do outside of your normal job? "Do I take this extra time to save money (or make money)?"
Say you earn $30 per hour at your day job, and could have additional work at $30 per hour if you wanted it. Let's pretend there are no taxes/benefits impact. If you had tasks at home (car maintenance, landscape maintenance) that you could hire out at $15 per hour, if you hired it out and worked 30 minutes to pay for an hour of landscape work needed, you had no financial impact of your decision and gained 30 minutes of free time. Seems in this case, unless you hate your job or receive intangible joy from doing landscaping yourself, it would be better to hire someone and enjoy your gained 30 minutes pursuing other pleasures. (This assumes the person you hire can do the job well!)
Same scenario, but you have plumbing work need and the plumber charges $90 per hour labor. It seems if you are up to the task and can perform it with the same quality and only a little slower than a plumber could, it may make sense to do this yourself (as you are 'earning' a rate greater than your marginal rate at your job). Even if the plumbing job takes you 2 hours vs the plumber's 1, you 'earned/saved' at a $45 per hour rate.
Now this is a little more difficult to conceptualize for those on salary or do not have the ability to directly take additional hours at their day job. Even though I cannot directly work more hours to get more pay, I still establish "what is the value of the time I spend outside of work?"
The first 2 scenarios above are about hire a pro vs DIY decisions. This analysis is something I naturally think of. Where I think about it less is in some of the following scenarios.
I want to buy a $100 item. I spend 10 minutes a day for 6 days searching the internet and trying to find a good deal. On day 6 I find it for $90 and buy it. I saved $10 but I spent an hour of time and only 'earned' $10 per hour for that effort.
I buy 1 $500 plastic card (4 minutes); set the pin (1 minute); go to another store and convert the plastic to paper (10 minutes); fill out the paper and deposit it in an ATM (5 minutes). If I receive a gain (in points, miles or cash back) which I value at $10 but spent 20 minutes, my earning rate is $30 per hour (at the break even point so maybe this is not worth it.) This is where scale comes into play. If I can scale this process by 5x in about the same amount of time, now the hourly savings rate looks much better.
Sometimes this logic does not work well for me. If I have the opportunity to save $0.50 by performing a task that takes 30 seconds, but there is no ability to scale it, I often will not do this (even though the hourly earnings/savings is pretty nice). Also, while I neglected taxes and benefits impact in the scenarios above, in real life these factors do exist, so $22/hour 'saved' may be more equivalent to earning an extra $30/hour in reported income.
Do other people consider the hourly savings/earnings rate when making decisions about: DIY vs hire it out; MS/AOR schemes; couponing; etc...? Are there other twists/adaptations of the logic that you use? I would love to hear from some others about this topic.
