Is Time the Difference Between Big Spenders, Frugal Folks, and Cheapskates?

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Hey Big Spender! by Corey Ann on Flickr!I tend to find that most people exist somewhere along what I like to call the frugal spectrum.

At one end are people who spend like it’s going out of style and basically believe that any initiative that gets in the way of just doing whatever they feel like is a giant waste of time. For them, the value of their spare time is infinite – outside of what they have to do to keep some cash flow in their pocket, they think any time invested in saving money is time wasted. These are the people who shop only at specialty shops.

At the other extreme are people who will do anything to save a buck – the cheapskates. For them, the value of their spare time is zero. They’ll invest any amount of time it takes if it saves some additional money in the end when all costs are figured in. These are the people who make eight stops on their shopping trip to save $10 overall.

Most people, me included, are somewhere in between these two extremes. There are many money savers that are worth the time investment – for example, installing a programmable thermostat is a great way to spend an hour if it saves you money over and over again. On the other hand, washing Ziploc sandwich bags is not particularly cost effective – it takes a minute to get it actually clean and saves you a dime at most.

I would argue that the most frugal person in the world isn’t the person that goes grocery shopping at eight different stores. It’s the person that knows exactly what their spare time is worth, quickly recognizes opportunities that are worth more than the value of the invested time, and jumps on board.

How do I know the value of my time? One good way to start is to calculate your “true hourly wage“: the amount of money you make in a year (subtracting out all extra costs, such as transportation, clothing, taxes, meals eaten out, child care, entertaining coworkers, travel, etc.) divided by the number of hours you work in a year (adding the hours spent commuting, traveling, “decompressing,” shopping for clothes, working at home, etc.). This is the cash level that you’re currently willing to sell an hour of your time for.

Many people put a bit of a premium on their spare time beyond this true hourly wage, arguing that after a full day of work, your spare time has some additional value. Others argue that time invested now that can move retirement closer is well worth the same rate you get working – or even a somewhat lower rate. Both are reasonable ideas that fit in the middle of the spectrum.

This logic is why wealthy people pay others to perform most life services. Let’s say, hypothetically, you actually earn $500 for each hour you devote to work. If that’s the case, then unless you’re actually earning more than $500 from a frugal task, you’re better off paying someone else to do it and working instead. They know what the value of an hour of their time is, even if it’s an order of magnitude more than what you value your time at.

That means, compared to the rich person down the block, you’ll be making different choices about the value of your time. It’s cost-effective for most people to mow your own yard, for example.

Another common trap is the “live for today” mentality. While it allows you to spend wildly now and move more towards the “time has infinite value” end of the spectrum, it comes at the expense of time later on in life. If you’re in an enormous debt hole when you’re thirty because you didn’t bother to ever be frugal or control your spending, you’ll be digging out of that debt hole for the rest of your life. You’re making an hour now be much more valuable than an hour later on, and your older self will suffer the consequences.

What’s the point, in the end? Frugality is relative. It’s about finding the maximum value for your time, both today and tomorrow. A particular frugal choice might not make sense for you – for example, you might not find it cost-effective to clip coupons. What really matters, though, is whether you actually considered the value of your time in making that determination. A big spender won’t bother, nor will a cheapskate – they’ll both blindly follow their own paths. A truly frugal person will always think before leaping, even if they decide that it’s not worth it in the end.

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41 thoughts on “Is Time the Difference Between Big Spenders, Frugal Folks, and Cheapskates?

  1. I think that you hit the emotional button again Trent.
    You are right that many people will not truly consider the actual frugality of the decision and just blindly follow thier path.
    It’s the same theory that my mother-in-law uses when she drives to 4 different stores to buy her groceries in order to use her $0.50/off coupons. She spends more money on wasted time and gas than she saves using the coupons…but she thinks she is saving money!
    Great read!
    -Tyler

  2. This is worth thinking about. I was extremely frugal as a young mom…growing vegetables, sending off for rebates,buying everything at yard sales, and hanging diapers out to dry. When my kids were teenagers, my brother passed away, and my husband was diagnosed with cancer, I had no time to be frugal, time slowed to a minute by minute pace. As he recovered, I spent money on whatever I could to create happy memories. Now I’m somewhere in the middle. Time with loved ones is worth the expense. We all have our priorities of what is valuable to us, and spend likewise, I think.

  3. Great post Trent…most people kill themselves trying to save a buck. Sometimes it is worth doing it yourself and sometimes not.

    I AT least consider my time worth minimum wage when figuring if it is worth the effort.

    Flea

  4. The annoying thing about the “true hourly wage” idea is that many people are NOT freelancers and thus don’t have the option to just work another hour.

    So let’s say I make $50/hour (after taxes and expenses) at my 40-hour-a-week job. If I choose to hire someone to complete an hour-long chore around the house, how much can I really make with that extra hour? $7 at the local mall? Nothing?

    What’s my “true hourly wage” then?

  5. I disagree to a point. I don’t do anything that takes too much time to save a few pennies. But your valueing your time based on your wage has an inherent problem. Is your choice putting in one more hour at work or doing the frugal thing. Or is it an and? You are not giving up money earned at work if you are not giving up time from work to do it. Leisure time does have inherent value but based on your metric I should bag clipping coupons and the like because they can’t beat my hourly wage. Since I can only work full-time and not over I’m not exchanging wages for frugal behavior. Instead I’m increasing the amount I keep of my day job to meet my goals.

  6. Trent,
    I agree very much with the tone of your post. I do take issue with your Ziploc bag example. Not only can a single bag be used several times saving more than a dime, but the environmental cost should be considered. Saving 30 seconds in dish washing time so yet one more plastic item can reach a landfill is not quality savings. Even if you recycle the bags, reusing it a couple times first is a good environmental choice.
    Keep up the good work!

  7. I agree with Marie (#4) that my hourly wage is not a good measure of the value of my spare time. There are two major reasons for this:

    1) By definition, my wage is higher than the value I put on my time. If my wage were lower than the value I put on my time, then I wouldn’t work since I’d be then loosing value. Since my wage is higher, I’m making a profit by working.

    2) The value I put on time depends on lots of factors that change constantly. A minute saved while trying to get to the airport may be worth a lot more than a minute saved on a lazy summer afternoon. So it would be worth taking a cab to the airport, but not to the 7-11 to buy a pop.

  8. Great way to look at it. At some points in my life, my money has been far more valuable than my time (like when I was in college and had lots of spare time but not much money). At other points (which will probably become more frequent as I get older), my time has been much more valuable to me than my money. This is how I justify my time spent “couponing” I really don’t think I’ll do it forever, but its a great use of my time at this stage in life.

    Its nice to be in a financial and mental place where you can accurately evaluate which situation you’re in, and make the best decision accordingly.

  9. Although I know this isn’t really in the sprirt of your post, the “washing Ziploc sandwich bags is not particularly cost effective – it takes a minute to get it actually clean and saves you a dime at most” struck me. I do this, over and over until the bag breaks (unless it’s stored meat – then it gets tossed). The reason isn’t entirely frugal, as I recognize that each bag only costs a penny or two. I also want to respect the environment and not consume more materials than I need. While it’s not exactly the same as frugality, I do keep an eye on all my consumeristic tendencies, monitary and otherwise.

  10. I wash out sandwich bags and re-use them…but there’s a whole other story behind that, and FWIW, I don’t think it’s a huge waste of time.

    I also have to agree with Marie, that basing the value of my time based on my wages, is kind of silly when you’re making as little as I do. Not that I plan to stay at my current job for more than a year–just saying that, at 10 euros an hour, well, I could hardly afford to go grocery shopping!

  11. T do agree with most of what Trent has written; however, I have to agree with Marie’s comments and disagree with Tyler’s. I make a very good living; however, whether I spend 40 hours a week at my job or 80, I am still paid the same amount of money. If I can spend 1/2 an hour matching up coupons with things on sale that I use on a regular basis, and then 1/2 an hour shopping, I can save a substantial amount of money. That is an hour of time for which I wouldn’t be paid any extra at work, but I might be able to save $80 on my grocery bill. Even if my “true” hourly wage is higher than $80, that isn’t time I would have spent at my salaried job anyway. And, I don’t have to pay taxes on the money I save, whereas I pay a hefty tax on the money I earn. That coupon clipping time in turn frees up that saved money and makes it available for other things such as college funds, or increases in gasoline costs.

  12. Also, there are reasons to think that your spare time now is worth more than your spare time later. If you have good reason to think that you won’t be around in 20 years, your spare time now is worth a lot more. Similarly, if you have the opportunity to do something costly that you won’t have the physical ability to do later on, the opportunity might be worth taking. I feel bad when I go to tourist destinations and see all these older people who are dependent on walkers or wheelchairs. They probably saved and worked a long time to easily afford the trip, but unfortunately they waited until they were too frail to experience everything a younger, more mobile person could.

  13. We still live paycheck to paycheck so my time is often worth the amount of extra money I can generate in my spare time. Clipping coupons, going to more than one grocery store, working online, all these things earn me an hourly wage “off the clock.” Getting a maid would definately give me more free time and could I work during that time I would earn more than I am spending on the maid. But reality is: hiring a maid is an outflow of funds, whereas cleaning the house myself keeps the bills paid and money in savings.

  14. In general a good article, but my one comment (along the lines of some other commenters above) is that the dollar per hour value of my time is not necessarily a valid way of looking at the situation.

    For example, if the lawn needs to be mowed, who should do it? My hubby and I make different amounts of money, so would whichever one of us makes less be the one who should mow it regardless of our ability or interest in the yard?

    And, more to the point, if I hire someone to mow my lawn it’s only cost effective if I go to the office and work for the hour or so that the mowing takes. If I take a nap or go to the beach with my daughter instead of working I’m just flat out losing that money.

    Now, there are times when spending the money is worth it to me. When I was recovering from pneumonia a few years ago I would certainly have hired someone if the alternative was doing it myself. In that case a nap to help restore my health would be the best use of my time and it would be worth it to have someone else do a task that would have exhausted me at that point. But that wouldn’t be my conclusion today.

  15. Excellent post.

    Valuing time is as important as valuing your assets and liabilities.

    When people realize that all time is worth something, they you can start to prioritizes activities.

    This time value is the most compelling reason I have found to have no debt. In my opinion having as little debt as possible is the key to financial fitness, and that includes never using credit cards for any reason. When you have debt, or use credit cards, even when used “appropriately” they use up “time”

    Time actually paying the debt. Time thinking about the debt. Time earning money to pay the debt. Statements, arbitrage, etc. All use time.

    Without debt, there seems to be more time, which ends up being the entire point of most peoples lives.

  16. I did the math and I think my frugality guideline really does fall close to my hourly wage, even though that wasn’t intentional. Paying to have my lawn mowed and my oil changed costs less than my hourly wage, the professionals do a better job than I ever could, and it keeps me from having to buy and maintain the tools. Of course the frugal thing would be to do these things myself, but I don’t exactly feel like it’s a splurge – to the contrary, working with these and other local vendors, service providers, and restaurateurs gives me a strong feeling of community. If I made half of what I do, however, some of these same choices would be downright irresponsible.

    On the other hand, I derive what can only really be called an out-sized pleasure in finding a good deal, even when the time invested makes no sense. My husband thinks it’s a mix of funny and a little crazy how I will track which grocery store charges 25 cents less for pasta. I know it’s a little bit of “penny wise, pound foolish,” but it’s also just a hobby.

  17. I just thought of something that seems pertinent. Will I spend 15 minutes filling out an online survey for $2? Sure! Will I spend 15 minutes waiting for a manager override if a $2 coupon is not accepted at the grocery store? No! :) Obviously my time has different value at different times.

  18. I love that phrase “Frugality is Relative.” You should trademark that. There are so many factors and personality traits that determine if a person is frugal or a cheapskate. A single mother of 5 who buys Ramen Noodles and cheap hot dogs is being reasonable. Warren Buffet buying the same thing in order to savea little money is just plain silly.

  19. What sort of budget do you use and what are your categories (mortgage, eating in, eating out, car, home expenses, ect)?

  20. This is exactly how I decide whether to hire someone to do my home improvements, or whether I just do it myself. I make roughly $30 an hour at my real job (computer stuff), so a 10-hour task that I do at home has cost me $300 in addition to any actual costs. I suppose if I enjoyed doing the work, I would look at it differently, but time spent working on projects is time NOT spent doing the things I really enjoy.

    When a friend offered to landscape my front yard for only $500 in labor, I jumped at the chance. It would have taken me AT LEAST 30 hours to do the same job (which I dreaded, as it’s HOT where I live!) As far as I’m concerned, I saved a small fortune!

  21. I agree with much of what you said. However, to this point, I really love the diagram that Amy D did in Tightwad Gazette where you weigh not only money savings, but also enjoyment and possibly ‘other’ values. I wash baggies not because it saves money, and certainly not for enjoyment. I do it because of those ‘other’ values – my concern for the environment and a general attitude of not wanting to waste.

  22. I have noticed that in every third world country I’ve visited, citizens place an exceptionally low value on time. They will think nothing of getting on the bus for a 15 hour ride, when they could have flown for twice the price in one hour (a time different not at all unusual in mountainous countries with horrible roads). They also spend a lot of time sitting around doing nothing and watching the world go by, waiting for work. I think this supports the theory – they are cheap/frugal by necessity (poverty).

    BTW, I find it very hard to place a value on an hour of my time. It is not nearly as simple as dividing my income by total hours worked, because one extra hour of work does not yield a predictable increase in income. The only case where that would be really truly is manual type work like factory production. IMHO.

  23. I think wisdom has a lot to do with which way we fall on the Frugality/Cheapskate scale. I do my own car work, learned from a book and ask a lot of dumb annoying questions to mechanics. But I know they will charge 50 bucks and hour (my hourly rate is around 25), I can change all my brakes for the cost of the parts. This past week I was finishing up a marathon session, putting a new gas tank in my jeep and changing the brakes in my van. Unfortunately I got a little rough with the van and busted a rear tire stud. I waived the white flag, I had put so many hours in I was done, so I went to the mechanic to fix the stud (or should I saw “my screw up”. A job that would of taken me 2-3 hours, he showed me how to put the stud in, and finished in about 5 minutes. I walked away with a state inspection and stud repair for 30 bucks!!!! So in this case, me knowing when to say when, not being a cheapskate, actually saved me significant time and money then if I had only considered my hourly wage and gutted it out. So I guess I need to keep the white flag in handy.

  24. Saving money is a balancing act of time spent versus money saved. I will buy in quantity using coupons combined with sales to stockpile ( or anticipation buying as Trent calls it). This way, when I want to go to Starbucks once in awhile, I know I can do so without breaking the bank.
    And sometimes it is just plain hard to balance it. I know I can get really ridiciously frugal/bordering on cheap. I do have to watch myself.

  25. Does it make me a Cheapskate that I stood in line at the self check out with a screaming… i mean SCREAMING baby to get $2 off some training pants for my toddler? My coupon wouldn’t go through!LOL….

    I disagree on some points though. I think there are a lot of “closet” wealthy folks who do not pay anyone to do things for them. I think that is one of the signs of wealth…. that you don’t spend you money paying for things you can do yourself for free (although I DO get the concept of it not truly being free if you make so much an hour, etc. etc.)

    I also decided long ago, that I will do all I can to save, be thrifty and build wealth, but not at the expense of having a fulfilling life. I think it was on GRS that I read about a man who was a millionaire having never made more than min. wage, but he lived like a caveman. Fine for him, but I would rather enjoy some things now even if it means never getting to that million dollar mark. I am not going to do without at least a few things that I enjoy (like I just bought a Wii Fit for example… had a $20 coupon though!!!) My husband and I made this decision together. We will do all we can to build wealth, but we will also enjoy some things NOW rather than later. I know that will set up back a bit more but to me it is worth it. I guess I probably fall in the middle of the continuum.

  26. I hate getting ripped off, even for a few dollars. If I see something that I know is worth $3, I refuse to spend $5 — over 66% premium! I don’t know where that fits in your spectrum.

    And no matter how much money you have, a bargain is still a bargain. It feels good to get a bargain.

  27. I wash out some Ziplock bags too! :) The small snack size children’s bags adorned with cute animal designs. They cost 20p each or $0.40 as opposed to a dime and take a maximum of 10 seconds for a VERY thorough wash.

  28. I think that there is a tendency among folks to look only at the time-saving/dollars per hour savings and not the effect that doing something has on one’s general health and well-being. Mowing the lawn and doing yard work, if viewed simply through the lens of $/hour does not take into account the exercise factor and the sense of well being that comes from being outside. Same thing with housework.

  29. I think the value of your free time has nothing to do with how much you make at work. Unless you are able to work unlimited hours for pay, then your evenings and weekends (for most people) are times you cannot get paid for. So a landscaping job could take you 10 hrs in the heat, or you could pay someone. How much you choose to pay is based on what you value your free time and relaxation at, regardless of how much you made Mon-Fri. In fact, there are many “desk job” people that get paid $30/hr who would love the opportunity to work outside and would not pay someone no matter how cheap it was. And there are many people whose jobs involve labor outside who make much less than that that may choose to pay someone even if the cost was far above their “hourly wage”.

    I don’t mean to say that there isn’t a value to your free time, just that it isn’t tied to your salary. In fact, it is often the opposite, since higher paid workers often work less hard than the lower paid ones.

  30. I agree with most of everything, except the Ziploc scenario. I wash and keep mine in order to reduce, reuse, and recycle. Overall, this helps contribute to the bigger picture, not just my own.

  31. I agree that there are some people who don’t pay attention to the value of their free time when trying to save a buck. A friend of mine will spend most of the day driving all over town to get the best price on something that he often ends up returning anyway. Also, I would rather visit the dentist than do yard work and major home repairs (no exaggeration), so I now live in a condo and happily write the check for the association fee. After working 50-60 hours a week at a job I hate, the last thing I want to do is spend more time doing things I hate. I had a house for several years and I was miserable because I hardly ever spent any time doing things I enjoyed, like cooking or writing. Instead, it was a never-ending cycle of housework and work. That’s no way to spend a life. I still do my own minor home repairs and painting, but I leave the heavy work to the experts.

  32. Good article! I just wanted to add that washing out plastic baggies and some similar behaviors may have a bigger purpose than just saving a buck or two…less plastic and other stuff in the landfills! I don’t do it to save money, but I consider it an investment of another kind…an investment in the future, which I am staked in as much as my own financial well-being!

  33. Washing ziplocks and baggies seems like a waste of clean water. Is clean water more important than landfill?

  34. Most well-paying jobs I’m aware of pay salary, not hourly. Doesn’t the hourly worth equation fall apart at that point? If you can’t get overtime to pay for the theoretical service, then you’d instead calculate using your monthly surplus divided by hours spent on the task.

    If I have $200 in July once I’ve paid bills and funded savings, and a lanscaping job takes four hours, then I’d want to hire a lanscaper who charges less than $50 per hour. I’m no Will Hunting, but I think that makes sense…maybe.

  35. Who wastes the water? I put my wash and rinse water from my Ziploc bags in a bucket and water my flowers with it.
    Colorado Native

  36. One of my mom’s favorite sayings is “You can spend time or you can spend money.” It’s very true, and most of the time it’s obvious to me which one I’d rather save, based on the situation at hand.

  37. Knowing an hourly wage based on salary can be a useful trick for making decisions on how to spend your time, true enough, but it’s not everything. As others have pointed out, usually you don’t have the option of making an extra hour’s worth of money at your job instead of whatever frugal endeavor is at hand.

    More to the point for me is that I have no “salary” as a SAHM, unless I were to call it what I used to make or could make if I went back to work. Those feel-good calculations that went around a while back about the value of a Chief Cook & Bottle Washer at home being over $100 grand were good for a smile, but not much else (what, so my family, which includes me, owes me more than we bring home every week?)

    Another way to look at the hourly wage is, I believe, how Amy Dacyzyn explains in The Tightwad Gazette – you start with X frugal activity rather than your day job salary, and determine how long it takes you and how much money it saves you (because those are different for everybody). Multiply it to an hour, and tada, that’s the hourly wage for that activity. Then, you can decide if it’s worth doing.

    I know it takes a LOT of savings to get me to do something I hate, but something I enjoy as a hobby (super-shopping) will take less (although it usually doesn’t – I kicked so much butt at CVS today that I want to shout it from the rooftops!!! They might as well have given me cash to haul stuff out of there. Ah, good times!)

  38. “If you’re in an enormous debt hole when you’re thirty because you didn’t bother to ever be frugal or control your spending, you’ll be digging out of that debt hole for the rest of your life”

    I like your articles, however I find this statement to be emotionally loaded. Different people have different concepts of what an enormous debt hole is. Does this mean that those who are over thirty and have debt should think in this way?

    It hardly seems like a proactive way of thinking. More down the “life is hard, and will be hard” stream. I suspect that at least a reasonable portion of your readers may be here to learn how to be better – not to commit themselves to a psychology of “digging” out of a hole for the rest of life after thirty.

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