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Caitlin asks:
How do you decide what’s worth just spending the money? When do you stop shopping around? I sometimes get so fixated on something being too expensive that I spend hours looking for a better deal. Sometimes we end up with something great. Sometimes I end up going back to the first option and paying the original [price] or worst case – the price has gone up (often travel related).”
Boy do I relate to this one. There have been times when I’ve spent hours trying to save $10. Remember when extreme couponing was super popular? I tried it for 6 months. My grocery costs were tiny – usually $30-$50 per month – but it would absorb hours and hours of my time and resulted in a not-great diet.
My short answer to Caitlin’s question is: if I think I can save enough to make it worth my time, I will continue looking for a deal. If I don’t think I’ll save much, I won’t spend the time. For instance, spending 30 minutes looking for a flight that is $100 cheaper is almost always worth my time. Driving to a new store to buy Q-Tips that are on sale for 20 cents less – not worth my time.
It’s 2017, and it’s fairly easy to figure out what a “normal” price for something is. If I’m looking to potentially spend a lot, I’ll do some research to see what others are paying for the same or similar items. Then, because I know I’m good at finding deals, I’ll set my budget a little lower than what others are paying and shop around until I meet my goal price.
Easy, right?
If you want a little more detail, read on…
Since reading Your Money or Your Life
This post isn’t about YMOYL, but here is the formula so you know what I’m talking about.
total monthly income after federal and state taxes MINUS all work-related expenses (commuting, clothes, restaurant lunches, housekeeping, daycare, etc) DIVIDED BY your total work time (including commuting, dressing up, destressing, etc.)
For instance, let’s say your salary is $60,000/year ($5,000/month) and your total taxes after all deductions are $6,000. Your net monthly salary is $4,500/month. Now subtract work related expenses. Let’s say you spend $1,000/month of these (child care is expensive!). Then divide that number by the total work hours for the month. If you work 40 hours per week, and spend 10 hours per week doing other work-related activities, your monthly total work time is 214 hours for a 30 day month.
$4,500 – $1,000 = $3,500
$3,500 / 214 = $16.36 true hourly wage
Try not to get depressed about how low that number is right now. That’s not the point of today’s post.
Okay, so now we know that the example person above values their time at $16.36/hour. So if they can save more than $16.36 for every hour spent searching for a bargain, it’s “worth it” to them. Right?
Maybe. It’s not a bad concept. If that guideline works for you, use it.
However, I think there is more to it than that.
Different Time Values
Not all free time has the same value, in my opinion. For instance, if I have the option to look for a deal and the time I have available to do so is a lazy Tuesday evening when I otherwise might watch TV, I’d be willing to accept a $5/hour return on investment for that time even though my true hourly wage is much higher. But if I have a choice between looking for a deal and going to my favorite band’s reunion concert, I’m probably going to go to the concert unless the deal is major, major savings. As in, if I skip the concert I will win free round-the-world airfare. I’m not going to give up the time I value the most to save $10, but I might give up unscheduled time to do so.
When I am shopping around for a deal, I divide the dollar amount I think I can save by the amount of time it will take me to get the deal. Then I decide whether or not I think it’s worth my time, and when I’m going to complete the task. Once I have a plan, I start shopping around. At the end of the expected time, I reevaluate. If I think there is still a chance of saving a significant amount, maybe I’ll extend my time. Otherwise, I cut my losses and take the deal currently available. The point is, I value my time enough to realize saving a buck isn’t worth spending hours on my computer staring at Expedia…unless that time would otherwise be wasted.
Uh…what?
Here’s an example. Remember my trip to Strasbourg? I spent a fair amount of time researching the best hotel/activities/transportation/etc at a low price. Hours, for sure. But those were evening hours on a TDY in a town that shuts down pretty early, so I didn’t really have anything better to do. I was just sitting around in my hotel room. In that case, I probably saved $200 from my initial estimates, and I’d guess it took me about 15 hours to plan out the trip.
Don’t judge me for taking 15 hours to plan a 3 day trip. Remember I was bored, sitting in base lodging, with nothing else going on.
Anyway, that’s an hourly “wage” of $13.33. More if you consider that some of those hours would have been used trip planning even if I hadn’t been bargain hunting. Not bad, really. That’s a money/time trade off I’m willing to make. But I probably wouldn’t spend an hour going to three different grocery stores to save $13 when I’m at home and could be hanging out with friends. No, I value that time too much.
Why was I willing to put in that much time for a quick trip? Because I had the time. But also because, when I decided on my destination, I’d read several articles and blogs that outlined typical costs for the area and I was confident I could beat them. So I knew the potential savings, and I had time to spare.
Time to wrap it up…
Long story not at all short, my answer is that first you should evaluate the potential savings. As with my Q-Tip example, there are some purchases that aren’t worth exerting too much energy searching for a bargain*. You might not want to buy the overpriced tiny package of Q-Tips from a gas station in the same shopping center as the Walmart you need to go to anyway, so if those are your options go ahead and choose the cheaper one. But would you really drive from the Target you are already in to the Walmart 3 miles away just to save 20 cents on Q-Tips? I wouldn’t.
But if you think the savings are potentially worth your time, then also evaluate if you have the time to give. If you think you might save $200 on your next vacation by evaluating hotels for 2 hours, that might be worth it to you. But if the only time you have to look for those deals is while you are already on vacation…do you really want to give up that time? In that case, maybe you just spend the money and value your time.
Remember, money is a renewable resource. Time is not.
* CAVEAT: If you are struggling to make ends meet, take the time to bargain hunt and pay the least amount legally possible. This is the best way (financially) to spend your time unless you plan to get another job.
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