- Personal Finance
How To Figure The Hourly Rate of Savings
Have you ever wondered if it is worth it to be frugal and try to save money? I certainly have. As I stand there washing plastic bags or hang my laundry up to dry I wonder how much money I am really saving. Rather than continue to wonder, I decided to figure out the hourly rate of savings to see if things are worth it.
The first thing to do is find out how much the item costs. For instance, plastic bags are about $2 per box of 50 or $0.04 each. Second, determine if it costs anything to try to save money. Because I get dish detergent for free all the time with coupons and sales and I don't pay for water (we have a well) it doesn't cost me anything to wash the bags. Except my time. It takes me about 20 seconds to wash a plastic bag. I could effectively wash 180 bags per hour. I save $0.04 for each bag I wash. This means that per hour I save $7.20 washing plastic bags.
Let's look at the other example of hanging laundry up to dry. I borrowed a gadget from our library that let me figure out how much it costs to run my dryer. It was around $0.50 per load. I do seven loads of laundry a week (on average). It takes me about ten minutes to hang each load. By hanging all my laundry I have the potential to save $3.50 each week off my electric bill and it takes me an hour and ten minutes to do that.
Once you figure out how much money a frugal activity saves you, you can then decide if it is worth your time to do it. I make more money per hour when I work than both of the examples above. However, there are other reasons that I do those things. I take the impact throwing away all those plastic bags and creating new ones has on the environment into consideration. I want to keep my energy usage at a minimum so try to hang my laundry as much as I can, even if it doesn't save me a ton of money.
When the grocery store charges me too much for an item, taking the time to get it fixed will save me money. For instance, a few weeks ago I bought dog food that should have generated a $2 Catalina. It did not print. I went to the customer service desk on my way out of the store and stopped and got my $2 back. It took me no more than five minutes. This is a different type of hourly rate than above, because I can't always go out and get $2 from the grocery store. But when you figure the hourly rate ($2 x 12 = $24) you can see that it is worth my time to get my $2 back.
By figuring the hourly rate of savings on different activities, you can make a better decision as to how to spend your time. When my husband changes the oil in our cars rather than taking it to a shop, he saves us at least $60 per hour. If we were pressed for time, we would make the time to change our own oil over hanging laundry any day.
If you aren't working (by choice or from a layoff) then you will have the time to pursue the frugal activities that might not save a ton of money, but will save some. For instance before I was working (and really I still think this way) I made it my job to save us money. So even though the hourly savings rate wasn't much, if it did save us money, then it was worth my time. Because anything else I would do with my time wasn't generating an income. I could only generate savings, so I did as much as I could to do that.
So if you have wondered if doing frugal things really saves money or not, you can use these tips to help you figure out your real hourly rate of savings. Then you can decide if it is worth it to do those activities are not.