What is time worth? It’s a bit of a subjective question but an important one to consider when budgeting your expenses. We are living in a time where convenience is increasingly important to the average person, and people are more willing to pay for conveniences than ever before in order to save time and use that saved time for other things such as leisure. This could be due to the notion of work life balance, or the thought of spending more time to “enjoy life” and not worrying about problems that others can fix for you. This could also be due to the widespread areas of specialized knowledge that exists in today’s world with the continual emergence of technological advances in society compared to even 50 years ago, making it harder for us to do everything ourselves even if we want to. Let’s define services of convenience as tasks or activities that involve some level of specialized knowledge, tools, and/or time to perform.
The decision to pay for a service or for convenience will depend partly on affordability, but will also depend on the opportunity cost of forgoing the service or doing the activity yourself. Other factors will weight into the decision making such as one’s physical ability to perform such a task, as well as the availability of providers out there to offer the service you are looking for. The factors around utility and stress can play a role as well, which are more subjective and less quantifiable.
The most quantifiable, and arguably the most important factor from the ones listed above, is the opportunity cost or one’s time worth, and this article will focus primarily around this factor in order to make decisions around whether paying for a service of convenience is optimal or not. To understand how much one’s time is worth, we need to explore one’s income level or household income level first.
Looking at one’s annual gross salary (pre tax) is a good starting point. We are going to ignore income tax for this comparison. If someone makes $80k in annual salary, then dividing by 50 gives a weekly income of $1,600, and dividing by 12 gives a monthly income of approximately $6,667. Dividing by 2,000 gives an average hourly rate of $40/hr. Dividing one’s annual salary several ways helps us with comparisons for different expenses that might occur at different frequencies (i.e. only once or on a weekly, monthly, or annual rate).
Now let’s explore the expense side of the decision. The prices that companies offer for services of convenience take into account the materials, tools, and expertise required for the job that the consumer does not have. There’s also a cost of convenience that is baked into the price as well, and this could be looked at as the hourly rate paid for the person(s) doing the service that you are paying for.
Below is a mapped out decision-making tree to make things easier for us to determine whether paying for convenience makes sense or not. This thought process is a good habit to apply to any decision making around paying for convenience.
Here are the steps we are going to follow:
Steps to determine time worth
Calculate hourly, weekly, monthly, and annual salary pre tax
Select service in question
Determine average/approximate price for service from service providers
Figure out the cost of materials to do the service yourself
Determine whether there is specialized knowledge required, and if so, how long it would take for you to learn this specialized knowledge
Determine how long it would take to do this service yourself
Calculate the cost of doing the service yourself (opportunity cost) by multiplying your hourly salary rate by the length of time (in hours) it would take you to do the service yourself, as well as learning the specialized knowledge required to execute the service
Compare this opportunity cost with the average quoted price from service providers
If your opportunity cost is more, then it makes sense to pay for the service. If your opportunity cost is less, then it makes sense for you to do the service yourself.
If you have determined that it makes sense to pay for the service, then work this additional cost into your household budget and determine whether affordability is an issue or not. The definition of affordability will differ from household to household, so affordability is a decision independent to each household.
Using our $80,000 annual salary scenario, let’s look at three typical services of convenience and work through the decision-making process to determine whether to pay for the service or not. It may seem silly and repetitive, but the idea is to get a sense of the thought process involved when making these kinds of decisions as part of your monthly household expense budget, as opposed to the details of the hypothetical task at hand here.
The three scenarios are:
Vehicle Oil Change
Plumbing Service to fix a clog
Lawn Maintenance
Vehicle Oil Change
Who doesn’t love changing their oil? Well apparently a lot of people. At the same time, not everyone wants to pay $100 or even more to get one done at a dealership or mechanic’s shop. I’ve compiled average oil change prices based on my own historical oil services (this cost will depend on the type of vehicle you have). The decision tree is as follows:
1) Calculate hourly, weekly, monthly, and annual salary pre tax
Hourly Salary Rate: $40
Weekly Salary: $1600
Monthly Salary: $6,667
Annual Salary: $80,000
2) Select service in question
Oil Change
3) Determine average/approximate price for service from service providers
$100
4) Figure out the cost of materials to do the service yourself
I will ignore basic garage tools because these are one time costs, and would only need to be purchased once for future unlimited usage. I’ll include specialized tools.
Oil: $30
Oil Filters: $20
Drain Pan: $20 (one time cost)
Oil filter wrench: $10 (one time cost)
Total: $80
5) Determine whether there is specialized knowledge required, and if so, how long it would take for you to learn this specialized knowledge
1-2 hours of watching DIY video tutorials (again, you should only have to do this for the first time when conducting the service by yourself)
6) Determine how long it would take to do this service yourself
1-2 hours
7) Calculate the cost of doing the service yourself (opportunity cost) by multiplying your hourly salary rate by the length of time (in hours) it would take you to do the service yourself, as well as to learn the specialized knowledge required to execute the service
Let’s use the average time to learn the specialized knowledge and to do the service yourself in this calculation. We will also include the full cost of all materials and tools
Cost of doing it yourself for the first time = (1.5hours + 1.5 hours)*$40/hr + $80 = $200
Let’s look at the cost of doing it yourself in the future after having done it once already. You wouldn’t need to buy new tools, and let’s assume you won’t need to spend time learning how to do it yourself again either.
Cost of doing it yourself thereafter = 1.5h * $40/hr + $50 = $110
8) Compare this opportunity cost with the average quoted price from service providers
The cost of doing it yourself for the first time: $200
Cost of doing it yourself thereafter: $110
Average cost of oil change from service provider: $100
9) If your opportunity cost is more, then it makes sense to pay for the service. If your opportunity cost is less, then it makes sense for you to do the service yourself
The cost of doing the oil change yourself is quite high, and seems quite evident to just pay for the service. However, as with any project or new area of learning, there is always an upfront cost involved. If you continued to do oil changes yourself for the foreseeable future, $110 dollars to do it yourself might not be a bad idea, especially if you enjoy doing it. However, this comparison will vary depending on how much your time is worth (i.e. salary levels), as well as the cost of an oil change from service providers which will fluctuate with material costs and the type of vehicle you have.
10) If you have determined that it makes sense to pay for the service, then work this additional cost into your household budget and determine whether affordability is an issue or not. The definition of affordability will differ from household to household, so affordability is a decision independent to each household.
This service is usually performed twice a year for most people, so there should be an expected cost of car oil change maintenance of at least $200/yr regardless of whether you decide to do it yourself or not.
Plumbing Service to Fix a Clog
This is my absolute favorite. Paying hundreds of dollars for a service that can take 10 minutes. Let’s dive right into it.
1) Calculate hourly, weekly, monthly, and annual salary pre tax
Hourly Salary Rate: $40
Weekly Salary: $1600
Monthly Salary: $6,667
Annual Salary: $80,000
2) Select service in question
Plumbing services needed to fix a sink clog
3) Determine average/approximate price for service from service providers
This can vary greatly, but let’s assume the plumbing service does not involve invasive maintenance into your sewer system! Let’s keep this simple… we are dealing with a clogged or backup in your sink.
$250 - $500
4) Figure out the cost of materials to do the service yourself
Again, I will ignore basic tools because these are one time cost, and would only need to buy them once for future unlimited usage. Every household should own basic tools like a wrench and pliers. If you don’t, well, you should get on that.
Chemical Drain Product: $10
Plumbing Snake: $20
Small pail: $5
Total: $35
5) Determine whether there is specialized knowledge required, and if so, how long it would take for you to learn this specialized knowledge
1-2 hours
Definitely learning how your sanitary piping works from a sink is needed, as well as where clogs can occur, and how to use unclogging tools like a snake. It’s quite simple once you know, but it may feel daunting at first to learn this knowledge.
6) Determine how long it would take to do this service yourself
1 hour
7) Calculate the cost of doing the service yourself (opportunity cost) by multiplying your hourly salary rate by the length of time (in hours) it would take you to do the service yourself, as well as to learn the specialized knowledge required to execute the service
Cost of doing it yourself = 1 hr*$40/hr + $35 = $75
8) Compare this opportunity cost with the average quoted price from service providers
Cost of doing it yourself: $75
Cost of getting plumbing services: $250 - $500
9) If your opportunity cost is more, then it makes sense to pay for the service. If your opportunity cost is less, then it makes sense for you to do the service yourself.
I purposely picked this example because of how bothered I am for paying for simple plumbing services. This is an easy skill to learn and practice to save hundreds of dollars. Now if you have a sewer main backup or a pipe leak in your house, well that’s a different story… go call a plumber ASAP! This example will vary depending on your salary level. Material costs and costs of plumbing services are fairly static.
10) If you have determined that it makes sense to pay for the service, then work this additional cost into your household budget and determine whether affordability is an issue or not. The definition of affordability will differ from household to household, so affordability is a decision independent to each household.
This cost should be included as part of a general house maintenance or “rainy day fund” category in your household budget. Hopefully paying hundreds of dollars for plumbing services isn’t a regular monthly occurrence. If it is, then double check whether your water lines are made of cardboard.
Lawn Maintenance
I like this example because it is a very common service that people pay for here where I currently live (it’s not a ritzy area, it’s just too damn hot outside to do any labor intensive work). Let’s assume you get this service done once per month.
1) Calculate hourly, weekly, monthly, and annual salary pre tax
Hourly Salary Rate: $40
Weekly Salary: $1600
Monthly Salary: $6,667
Annual Salary: $80,000
2) Select service in question
Lawn maintenance (i.e. mowing grass, line trimming, and cleanup)
3) Determine average/approximate price for service from service providers
This will certainly depends on how big your yard is and where you live.
$50 - $200 per service
4) Figure out the cost of materials to do the service yourself
This is a bit tricky because obviously you need a lawnmower and other equipment to do yardwork. Again, similar to the oil change example, these are up front costs that would be incurred only once when you mow your grass for the first time (or when you first move into a house). After that, the only cost for future lawn maintenance work is your time, and perhaps fuel (opportunity cost). However, one could argue that deciding to pay for lawn maintenance would render the need for lawn equipment completely obsolete.
Lawn Mower: $400
Line Trimmer: $150
Leaf Blower: $75
Total: $625
5) Determine whether there is specialized knowledge required, and if so, how long it would take for you to learn this specialized knowledge
No
6) Determine how long it would take to do this service yourself
2-3 hours
7) Calculate the cost of doing the service yourself (opportunity cost) by multiplying your hourly salary rate by the length of time (in hours) it would take you to do the service yourself, as well as learn the specialized knowledge required to execute the service
I’m going to show the cost of doing it yourself for the first time which includes the initial purchase cost of the equipment. The cost of future lawn maintenance will simply be your opportunity cost.
Cost of doing it yourself for the first time= 2.5 hr*$40/hr + $625 = $725
Cost of doing it yourself thereafter = 2.5*$40/hr = $100
8) Compare this opportunity cost with the average quoted price from service providers
Cost of doing it yourself for the first time= 2.5 hr*$40/hr + $625 = $725
Cost of doing it yourself thereafter = 2.5*$40/hr = $100
$50 - $200 per service
9) If your opportunity cost is more, then it makes sense to pay for the service. If your opportunity cost is less, then it makes sense for you to do the service yourself.
For this example, it doesn’t make sense to compare the cost of doing it yourself with the initial equipment cost against paying for the service. It might make sense to extrapolate the costs over a longer period of time that aligns with the predicted life span of your lawn equipment, but let’s keep this simple. The cost of doing it yourself lies within the range of having the service performed, and for some folks, there is a compelling argument against doing lawn maintenance yourself! The cost comparison will fluctuate depending on one’s salary level, house/lawn size, and frequency of maintenance services.
10) If you have determined that it makes sense to pay for the service, then work this additional cost into your household budget and determine whether affordability is an issue or not.
The definition of affordability will differ from household to household, so affordability is a decision independent to each household. For a lot of folks, the decision to pay for this service more depends on physical ability to do lawn maintenance themselves as opposed to the cost. Lawn maintenance service would fall under the household maintenance budget category.
Although these examples were intended to be a bit humorous in nature, the point was to showcase the decision-making steps and thought process behind paying for services of convenience by applying these steps to different real world examples. Time is a very important factor, if not the largest, when deciding whether to take on an activity or not. The finite nature of time can make these decisions difficult, so being able to quantify time should help individuals decide whether paying for convenience is in fact really worth their time and money.