I was in line at the post office recently. I watched as a man haggled with the postal clerk to see how many brochures he could put in his envelope before the postage price jumped to the next level. When he realized that the next level was only 17 cents higher, he tried to see how many brochures he could fit in the envelope until the next next level. At some point, he decided the cost was too expensive. He then pulled out brochures until the envelope was just at the edge of the price that he deemed to be too high. After ten minutes of this, he paid the postmaster and left.
This is not a rant about how long I had to wait in line. Nor is it a rant about a random man at the post office.
This man is all of us. Especially if we’re self-employed, or artists, or business owners. Maybe we don’t obsess over a postage meter in order to save a dollar. But many of us have money-saving habits that ultimately waste money.
The value of time
Let’s say that the man at the post office is an artisan selling a product. Let’s say that he was sending his brochures to an exclusive crafts conference for display on a small table. Let’s say it took him 15 minutes to drive to the post office, and 15 minutes to drive back to his studio. If we include his haggling time, that’s 40 minutes. Add in the extra time it takes to shift focus and do a task like this – 10 minutes on either end. This brings his time expenditure to one hour.
So, let’s look at this like a junior high math problem:
A man crafts beautiful wood walking sticks that sell for $750 – $1500 each. It takes him five to ten hours to make each stick. How much is his time worth per hour?
If you said, “$75 to $150 per hour,” then you’re correct.
A man’s time is worth $75 – $150 per hour. He spends one hour going to the post office so that he can save $1 on postage because he believes in being frugal. How much money did his trip to the post office save him?
If you said, “One dollar,” you’re wrong.
It actually cost him $74. (Plus gas.)
Let’s say the man decides instead to stay home and spend the morning working on a new design of one of his walking sticks. Let’s say he gets lost in the creativity and focus. Let’s say he enjoys the day and almost finishes a new walking stick. At 3pm, he looks up at the clock and remembers the brochures he has to mail. His mailman usually comes at 3:30. The man, unsure of how much postage the envelope will require, stuffs a bunch of brochures into it, and puts $4 in postage on the envelope just so he can be sure it’ll make it to its destination. How much money did he just waste?
If you said, “Three dollars,” you’re wrong.
He actually saved $71 because he spent his time doing what makes him the most money. (Plus the added bonus of being happier and meditative, which contributes massively to his overall health.)
The lesson is this: A penny saved is not always a penny earned. Suze Orman is not always right in her techniques for squeezing every last dollar out of a day. The equation of your finances has to take into account how much your time is worth, and how much you value what you do with your time.
Have you ever stopped to figure that out?