Measuring Frugality

Most of the time, when I’m evaluating the usefulness of a frugal tactic, I convert that tactic into dollars per hour. I’ll figure out how much I save, how long it takes me to complete that tactic, and then use a bit of basic math to convert it to that standard unit.

For example, let’s say you want to figure out the dollar per hour rate of emptying out a tube of toothpaste (which happens to be something I looked at about a week ago and that I’ve received a few questions on regarding the math, so I’m using it again). Your tube of toothpaste costs $3. You use it each morning and you find that the tube is almost empty after 45 days. You also find that if you spend a minute tightly wrapping the tube up from the bottom, you can get enough toothpaste out of the tube to last for another five days.

So, how much do you save just by squeezing that tube? We’re not worried about the time part yet – we just want to know how much we’re saving. Well, if we don’t do it, a $3 tube of toothpaste is gone after 45 uses. If you pull out a calculator and divide 3 by 45, you’ll find that each use of the toothpaste costs you $0.07 (rounding up).

Now, if you manage to get five more uses out of the tube, you just multiply how much it costs per use – $0.07 – by the number of extra uses you get out of the tube, which is 5. You’ll save $0.35.

So, how do I turn that into an hourly rate? Since you know it takes you a minute to fold up the tube, you know that you’re saving $0.35 for one minute of work. So, how much do you save for 60 minutes of work? You just multiply $0.35 times 60, which gives you $21 per hour of toothpaste tube folding.

The problem with that number is that you’re still looking at something that takes just a minute. It’s hard to see how you could directly spend that one minute earning more money, so it’s not really valid to compare the hourly rate of frugality to an hourly rate of income. (You do know that the next sixty times you fold up that tube – over the next five years or so – will save you a total of $21, though.)

Not only that, an hourly rate ignores the other benefits of frugality. If you spend a minute squeezing an extra $0.35 of toothpaste out of a tube, you’re reducing the number of empty toothpaste tubes that you’re throwing into the trash. The less trash you leave out on the curb, the less trash goes into landfills. The fewer tubes you use, the fewer tubes are manufactured. Most frugal tactics reduce waste, which has a value that’s not directly incorporated into a “dollars per hour” calculation.

So what good is figuring out the “dollars per hour” with a frugality tactic?

Well, for starters, it provides a standard way for comparing frugal tactics. That’s really the purpose of doing it. It allows you to compare the amount you save on two drastically different activities in a standardized way eliminating the difference in time invested. You can compare the amount you save changing the oil in your car to the amount you save squeezing out a toothpaste tube without worrying about the difference in time each tactic takes.

Because of that, it gives you a shorthand way to decide which tactics to bother with. In reality, we don’t have infinite time to execute every single way of saving money. While we might do a number of things around the house that save cash, eventually you’re going to get tired or brush up against other appointments.

Let’s say you have an hour to do frugal things around your house. It makes a lot of sense to have a simple way to compare the tasks to maximize your savings if you have a rough sense of how much you’re saving for the time you invest in each tactic. If I have three hours worth of obvious little things I could do to save money around the house but only an hour to spend, I should choose the ones that win “big” and not worry about the other ones.

Also, I rarely calculate the exact amount in my day-to-day life. I calculate all of the numbers for the purpose of articles for The Simple Dollar, but in my day-to-day life, I trust my ability to estimate these numbers. (Usually, I’ll find something in my daily life that I’ve estimated and I’m curious about the exact cost of it, so I’ll turn that question into an article.) It’s not perfect, of course, but it’s quick. I find that I’m rarely surprised when I actually calculate the numbers, and if I am, it causes me to make better estimates in the future.

It’s easy to measure frugality in terms of figuring out how much you saved. It’s a little trickier when you’re trying to figure out what to do with the time you have. I find that the “dollars per hour” number is pretty useful for me, as I just do a quick estimate of the options available to me and take on whichever has the best return for my time.

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