Is a Frugality Tip That Saves You a Quarter a Waste of Time? Some Notes on Economies of Scale

A recent comment by Mindy provided an interesting insight into how many people view frugality:

I know I’m a little late coming to this discussion but, unless I missed it among the large volume of comments, no one is counting the amount of time spent making stuff in order to save. The link to the laundry detergent got me thinking about this. Sounds like a [significant amount] of time in order to save 27 cents per load of wash (I’m pretty sure that’s the statistic he quotes).

The question at hand revolved around my recipe for homemade laundry detergent. I estimated that my homemade detergent would save about eighteen cents per load over buying Tide with Bleach in bulk.

For many people, that’s an open and shut case right there. Eighteen cents? For fifteen minutes of effort? That’s enough to make people walk away without even considering the solution any further.

If I were to only save eighteen cents from fifteen minutes of work, I wouldn’t bother, either, but here’s the catch: most frugal solutions take advantage of scale. To put it simply, the recipe is worthwhile not because you save eighteen cents per load, but because that batch of detergent you make takes care of fifty two loads of laundry.

I’m not just saving eighteen cents with that fifteen minutes. I’m saving fifty two times that much – $9.36, to be exact. In terms of a comparable wage, that’s $37.44 an hour after taxes for the time spent making the detergent.

The same principle applies to many frugal projects. Take my homemade breakfast burritos. The procedure for making breakfast burritos takes about an hour and each burrito has about seventy cents worth of ingredients in it. In terms of one burrito, it’s not a bargain at all – you can get a breakfast burrito for $2 pretty easily (although I think mine tastes better). However, the recipe makes thirty two burritos at once – you can then store them in the freezer for future use. This cuts the time commitment per burrito to less than two minutes, meaning that your hourly rate after taxes for making the burritos is somewhere on the order of $39.

You can see the same benefit from many different frugal projects. Installing a programmable thermostat, for example, might take you an hour, will cost you $40 or so, and will only shave $5 or $10 off of your monthly energy bill. However, you’re saving that $5 or $10 off of every energy bill thereafter without any change in effort. After five years, your hourly rate after taxes for installing that thermostat is $410 per hour.

The catch, of course, is that you don’t see the savings up front. Instead, it’s metered out gradually to you over time. Each time you eat a homemade burrito, you’re quietly saving $1.30. When you use a cup of the detergent, you only save eighteen cents. And it’s that catch that keeps many people from seeing the bigger picture and taking advantage of how much money frugality can really save you.

Try this: take a lazy Saturday and fill it with frugal projects that have a good long term return for your time investment. Install some energy efficient light bulbs. Install a programmable thermostat. Make a batch of homemade breakfast burritos and maybe a few casseroles for the freezer. Make a batch of homemade laundry detergent. Put your home entertainment center on a single switch so you can cut power to all the devices with just a wrist flick. Swap out your laundry softener with white vinegar.

At the end of that day, you won’t have saved any money. In fact, you’ll have spent quite a bit, and you’ll have used up a day.

What happens next is where frugality pays off. You’ll quietly find yourself spending a lot less money than you used to spend in your monthly budget. It’s suddenly far easier to make ends meet than before. Your food bills are cheaper. Your household supply budget is cheaper. Your energy bill is cheaper. Much of the time, the bills stay cheaper, too.

Then, start applying that savings to your debts – or to your long term savings. You’ll quickly find that those silly frugality tips, like saving a quarter on your laundry load, aren’t that silly after all.