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We all like to save a buck, but it’s easy to go too far in our efforts. I’ve addressed this in previous posts on frugal hacks that might cross ethical lines and crazy ways to save money like reusing dental floss or making your own toilet paper.
But today I’m talking about spending too much time to save money.
Your time is valuable. Why spend it clipping coupons or doing anything else to save money unless you save enough? But what is “enough?” Here’s my standard:
My frugal efforts should yield at least 75% of the average hourly income I normally earn.
I make about $20 per hour, so I hope to save at least $15 per hour for my time. My reasoning is this: Why should we be paid a lot less for our frugality than for our normal work?
For example, if you’re only saving $2 scanning grocery ads for an hour, it makes more sense to drop it and stay at work an extra hour if possible — you’ll be much further ahead.
The 75% part of my rule takes into account that you pay taxes on your regular earnings, but when you save money on purchases you keep all of the savings.
You can set your own “savings per hour” rate, but that still leaves a few questions unanswered, like these…
- How do you calculate your savings-per-hour?
- Which activities typically save the least money per hour?
- Which activities typically save the most money per hour?
- How do you save more money for each hour of effort?
- When should you make exceptions to your hourly savings rate?
Let’s look at these questions one at a time…
How Do You Calculate Your Savings-Per-Hour for Various Activities?
In theory it’s simple: If you spend two hours on Sundays reviewing ads and clipping coupons, and it saves you an average of $25 on groceries, you just divide the $25 by two and you get a rate of $12.50 per hour.
If your minimum or “target” rate is, say $8 per hour, keep clipping.
Of course it gets more complicated than that. Suppose you spend two hours closing a checking account and opening another at a new bank, to save $4 monthly on fees. Since the savings could go on for years, how much have you saved?
You could guess at how long you typically have an account, but don’t worry about it. In cases like this the savings are usually significant enough even in the first year ($24 per hour in the example).
And in general don’t worry too much about accuracy. All you ever need is a rough estimate based on this simple formula:
Divide the money saved by the number of hours spent.
With a little bit of calculation you can then start to answer the next question…
What Are Some Low Savings-Per-Hour Activities?
Most lists of the “worst ways to save money” are about strategies that simply don’t work. For example, if you use twice as much of a “cheap” toilet paper (because it’s too thin) you might actually spend more instead of saving money.
But many strategies really do save you money — they just don’t save enough for the time they take. It depends on your results, of course, but here are some likely suspects…
This can be well worth it for some readers (especially if you’re shopping for a big family), but for those of us who rarely buy brand-name products, cutting out and organizing coupons can eat up a ton of time for very little in savings.
Driving Out of the Way for Cheaper Gas
If you drive out of the way to go to a cheaper gas station, you’ve spent time and money for extra gas. Unless you have a large tank on empty, and the price is much lower, the savings are likely to be minimal.
A better plan is to use GasBuddy to find the cheapest gas that’s on the route you normally take.
Most Toilet Paper Frugalities
My post on crazy ways to save money has several examples of how people save money on toilet paper. These include making your own toilet tissue by crumpling scrap paper repeatedly to soften it, reusing toilet paper from “papered” yards, and pulling apart and re-rolling two-ply toilet paper to use as one-ply.
Yes, there is the “ick factor,” but in any case I doubt any of these tactics could save you even close to minimum wage for your time.
Reusing Plastic Wrap
This is another favorite of extreme cheapskates, and it may sound reasonable. But inexpensive plastic wrap costs less than a penny per piece to start with, so how would you justify any time spent cleaning and recycling it?
Look, tomorrow punch out at work five minutes later and you’ll probably earn enough to skip two years’ worth of tedious plastic wrap recycling.
Buying an Extra Fridge for Storing Sale Foods
Stocking up on sale or bulk items can save you money, but by the time you account for the extra waste and extra electricity, it probably isn’t worth buying an extra refrigerator. Instead just use the space you have and stock up primarily on non-perishables.
If you start doing even rough calculations of money saved and time spent, you’ll quickly see which frugal activities are a waste of your time. You’ll also answer the next question…
What Are Some High Savings-Per-Hour Activities?
There are some money-saving activities that can save you $20 per-hour or even $100 per-hour or more. Here are a few examples to get you motivated…
Reducing Your Credit Card Debt
If you find a way to pay an extra $400 this week toward a credit card balance with 18% interest, you’ll save $6/month in interest charges until the card is paid off.
That could easily be over $100 saved for an hour of planning and arranging. Take the time to find ways to pay extra every month, and you’ll save even more.
Finding Cheaper Rent
This one can be a lot of work, but the big, ongoing expenses are where the big savings are.
If you find a place that meets your needs and costs $200 less per month, you’ll save almost $7,200 in three years (that’s the average length of a stay in a single-family rental home).
Even if the savings is only $6,000 after the costs of moving, that’s still enough to justify a week or two of moving-related work, right?
Finding a Better Mortgage Loan
If you owe $150,000 and you get a mortgage interest rate of 3.5% instead of 4.5%, a mortgage calculator shows you’ll save almost $13,000 in nine years (that’s the average time people spend in a home they own).
That might be worth a few hours of effort, even if you have to pay a couple thousand in refinancing costs.
Shopping for Cheaper Insurance
An hour on the phone or online might easily save you $100 per year on homeowners insurance.
The same can be said for auto insurance or health insurance (if you buy your own). Even if the result is only a measly savings of $20 per year over the next five years, and it takes you two hours of work, you’ll still save $50 per hour.
Reducing Utility Costs
Cutting the ongoing cost of your heat, electricity, and water can save you a lot of money over time.
Some low-cost, time-efficient ways to do this include insulating your water heater, caulking and sealing air leaks in your home, fixing a leaky toilet flapper, and installing a new programmable thermostat.
Even replacing conventional light bulbs with LED bulbs is well worth your time if you do just the six-or-seven most-frequently-used lights.
You’ll have your own examples of where you can save the most money, because you know where you spend the most.
Large purchases are one place to look for savings, but it’s going after your regular expenditures that offers the biggest payback for your frugal efforts, which brings us to our next question…
How Do You Maximize Your Savings-Per-Hour?
Here is the simplest way to maximize your savings-per-hour:
First do the things that save the most money.
It really is as simple as that.
Look, it’s easy to recycle bags, clip coupons, and engage in other low-pay frugality, while putting off the things that really save big, like shopping for cheaper insurance or insulating the attic.
But the little stuff isn’t where you’ll get the best return on your time.
Focus on doing the big stuff first, and keep doing it, even if you never get to the little stuff. The big stuff can save you so much more money.
For example, taking a few hours to find a better mortgage loan might save you more money than a lifetime of clipping coupons.
Notice that “big stuff” also means expenses that are recurring. Getting a discount on a new boat is nice, but it’s a one-time thing. Researching grocery stores to find the one where you’ll spend $20 less each week will save you over $1,000 every year.
The Rest of the Story (And the Exceptions)
Okay, I said I want my savings-per-hour rate to be at least 75% of what I normally earn. But in reality that rate is flexible. Why? Because some frugal activities offer more than just financial gains.
For example, I may save only $1 or $2 on gas by walking 30 minutes to-and-from the store versus driving, but I like walking and it’s good for me.
You can probably think of your own examples. If you enjoy clipping coupons as a strategic “game,” you might be content to save just $4 per hour doing it.
On the other hand, if you really hate dealing with banks (an enjoyable hobby for me), you might leave your money where it is, even if you could save $50 annually in fees for a couple hours of work.
So go ahead and adjust your “minimum rate” for factors like how much you enjoy (or hate) an activity. This whole “savings-per-hour” approach to frugality is really more of an art than a science in any case.
It’s also more about the mindset than the math. The point isn’t to try for an impossibly precise measurement of what you’re savings for you time.
The point is to look at what you’re doing with an eye toward wasting less time and getting better results.
Calculating the savings-per-hour you “earn” is just a way to get you thinking in the right direction, so you can better use your most precious asset: your time.
Tell us how much you want to save per-hour for your efforts, and where you make exceptions … and keep on frugaling!