I don’t know if it’s arrogance, ignorance, or entitlement, but I often hear my fellow citizens exclaim the value of their time. When faced with a task they find unpleasant, they opt to pay someone to do it for them. In many cases, this is perfectly acceptable. However, I find a lot of people’s estimation of the value of their time is grossly inflated.
Let’s say you’re paid approximately $50 an hour for your services. A pedicure costs $25 and takes approximately one hour for a nail technician to complete. The difference of $25 is what you “make” by having a nail technician give you a pedicure.
But, let’s take a step back.
You have to pay taxes on that $50. Assuming 25% of your wages go to pay federal and state income taxes, Social Security, and Medicare, you’re only clearing $37.50. So, you made $12.50.
Wait just a second.
How is it possible that talking on your cellphone with your girlfriend while getting a pedicure left you with an extra $12.50 in your bank account?
It didn’t. You didn’t make a dime. You spent $25.
Unless you actually earned $50 i.e., $37.50 after tax, while you were getting that pedicure, your logic doesn’t hold up.
I don’t hear too much of this now, but there was a time when countless financial “experts” thought it’d be better to invest extra money in the stock market over paying off your mortgage. If the stock market performed as it had in the past, you could get a greater return on your money by purchasing equity shares in U.S. companies.
That could work.
The stock market has historically returned between 10 to 12%. If your mortgage is 5.25%, ignoring the tax impact, you could get a 4.75 to 6.75% return using the aforementioned strategy.
Yep. It could work.
If you actually invest the difference!
Your theory doesn’t work if you squander the additional funds on tech gadgets, vacations, or deadbeat boyfriends.
Likewise, if you’re not actually making money when someone is washing your car or mowing your lawn or styling your hair, then it doesn’t matter how much money you could make while outsourcing these chores.
I’m not against paying someone to do what you’re incapable of doing. I’m not even against paying someone to do what you’re well able to do yourself. I just don’t think it’s rational for someone who is steeped in debt to reason that they’re some how financially savvy because they could make money while they’re doing absolutely nothing to make this money they speak of.
If you can actually afford to pay someone to do the things you’d rather not, have you considered whether you’re getting good value for your money? Not every professional is particularly skilled in their craft. I’ve made the mistake of paying for services I could’ve done a superior job doing myself. For instance, I’ve never had a nail technician do a better pedicure than me. I find the average nail tech, generally, doesn’t have the patience to give my callouses the time and precision they deserve. Plus, by skipping the salon, I can rest easily knowing I didn’t contract some nasty toe fungus from an unsanitary foot bath.
In addition to pedicures, I’ve taken on the task of shaping my eyebrows, cleaning my car (albeit on an annual basis), and washing and folding my laundry. It actually takes less time to do these things myself.
I’ll admit there is a benefit to casually assessing a monetary value to your time. By doing so, perhaps you’re less inclined to waste it. Again, assuming your bill rate is $50/hour, two hours of daily television will cost approximately $2,300 a month after taxes. Paying someone to watch television for you isn’t much fun, so you do it yourself. Excluding the cost of cable, DVDs, etc., do you actually think watching the tube is worth over $27K a year?
Maybe television isn’t your poison. Do you waste time playing video games, aimlessly surfing the web, or nurturing one-sided relationships? I confess that I’m no saint.
If your occupation requires you to perform routine tasks that don’t require much brain power, think about how you can make money while you make money. Instead of bobbing your head to Beyoncé’s greatest hits, listen to an audio book or a podcast that’ll increase your knowledge. Nothing against Beyoncé, but she’s rich. The information you obtain could eventually materialize as cash.
I applaud you for doing your part to support this great nation’s economy, but suffer no delusion that watching television while a maid cleans your house increases your cash flow.