(photo credit: Denise Mattox)
Recently, Christina had a post about deciding what your time is worth, and making the case that saving money is in some cases easier than earning the same amount.
Some of her examples included clipping coupons, cooking meals at home and grooming the dog herself.
It reminded me of a calculation I have seen discussed before, but I have not noticed it out there for a while.
I would argue (and it has been proven) that you actually have to earn a significant amount more than what you are spending, so if you can save that amount, you really are saving yourself from having to earn much more.
Confused? Let’s try an example.
Allison is a professional, making $40 an hour for contract work. She also has a cute dog, Fifi, that she likes to bring to the groomer. Allison pays $35 for the grooming and adds in a $5 tip for the groomer. How many hours does Allison have to work to pay for her dog to be groomed? 1 hour? Not so fast.
To get to work, Allison takes public transit, so she does not have to park. The bus costs her $6 per day. If she works 8 hours, that is $.75 per hour. (You could alternatively figure gas and parking.)
Allison is a law abiding, tax paying citizen. After her deductions and considering social security and medicare taxes, Allison has to pay 22% to the federal and state governments. That works out to $8.80 an hour.
Allison has a child, and that child goes to daycare when she works. For an 8 hour day, Allison pays $40 in child care. That costs Allison $5 per hour of work in an 8 hour day.
Allison tries to pack her lunch, but sometimes she forgets or just does not have time. When Allison gets lunch at work, it costs her $7. That works out to $.87 per hour to cover her lunch.
I am sure you could think up more expenses linked to Allison working, but for now, let’s just say these are all of them.
In total, Allison has to make $55.42 in order to actually have $40 left to spend after her expenses. For Allison, that works out to just over 83 minutes, or about an hour and twenty minutes.
So, if Allison grooms her dog herself, and it takes her 30 minutes, she will not just save $40; she will also save herself having to work for 83 minutes in order to have enough money left to pay for the grooming, which works out to a net of 53 minutes saved. [83 minutes not worked less 30 minutes spent on grooming the dog herself].
Of course, Allison will need to purchase some items to groom (if she does not already own those), such as shampoo, a nail clipper for her dog and a good dog brush. But after about one time of grooming herself, she should be in the black on that. On the flip side, if you want to be type A about it, Allison would spend time driving to and from the groomer, as well as money on gas, etc.
Still, anyway you cut it, Allison prevents herself from having to EARN much more than $40 by instead SAVING that $40 in the first place.
Something to think about when you calculate what your time is really worth.