The Time/Money Formula: How Much Money Will You Save?

A few posts back, I provided a Time/Money formula to let you know if buying any particular "time saving" product was worth the extra cost. By using this formula, you get a cost per hour figure, which provides a better idea of the real price.

For example, it can be hard to decide if spending $1 to save two minutes makes sense, but when you use the formula:

60 divided by the number of minutes saved x the extra cost = money per hour spent.
(60 divided by 2 x $1 = $30)

you'll realize that you're paying for that two minutes at an hourly rate of $30.

For a lot of people, that's more than they earn per hour, so they may actually be working two or three times the number of minutes saved to buy the product. In the example above, for instance, if you make $10 an hour, you're working six minutes to make the money to buy a product that saves you two minutes!

But what about the flip side? What about spending time to save money? Well, I have a formula for that, too.

Suppose you want to save $50 by mowing your own lawn, but doing that takes an hour and a half. How can you know if this is a good idea?

Try this computation:

60 divided by the number of minutes spent x the cost saved =money per hour saved.
(60 divided by 90 minutes =.66 x $50 = $33 per hour saved)

For someone who makes $20 per hour, that’s a pretty good deal. But if you make $45 an hour, you’re spending an hour and a half, worth $67.50 at your pay scale, to save $50.

Of course, there are other factors involved in any such decision. You may need the exercise involved in mowing your lawn, or if you may just enjoy doing something outside. But if saving money is your motive for sweating in the hot sun, this version of the Time/Money formula will help you decide if its worth it.

So again:

To find out if it’s worth spending money to save time:
60 divided by the number of minutes saved x the extra cost= money per hour spent.

To find out if it’s worth spending time to save money:
60 divided by the number of minutes spent X the cost saved= money per hour saved.

I’m going to post these formulas in the sidebar. Try 'em out....you may be surprised at the results when you start checking things with the Time/Money Formulas.

The Time/Money Formula

Sometimes it can be hard to know if a time-saving product or technique actually is worth the extra cost. Here's a simple formula that will help you decide.

First, you need two pieces of information: how much extra the item costs you, and how much time, expressed in minutes, you'll save by buying it.

Once you know this, divide 60 by the time saved and then mulitply by the extra cost. This will tell you how much money that product is really costing you, expressed in dollars per hour....and that can be an eye-opener.

For example, in my article "Time Saved, Money Wasted" I talk about pre-peeled onions that cost $1 extra each. (I'm not kidding!) It takes a whole thirty seconds (or .5 minutes) to peel an onion (and yes, I did peel an onion and I timed myself) so when you plug these two figures into the formula, you get:

60 divided by .5 minutes = 120 x $1 = $120 per hour.

That's right. You're paying for that extra half-minute at a rate of $120 an hour!

Let's try another example. If it takes three minutes to pack a lunch for your child, and one of those prepackaged, grab-and-go crackers, meat and cheese lunches costs $1.75 more than than your do-it-yourself ingredients, how much are you spending per hour to save those three minutes?

60 divided by three minutes = 20 x $1.75 = $35 per hour!

(Maybe filling a lunch box with a P&J sandwich, a banana and a refillable container of apple juice--which would cost about a $1--is looking like a better idea?)

Example #3:
It takes you 30 minutes (actual prep and cleanup time) and cost $3 worth of ingredients to bake a homemade pie. A frozen pie involves no prep time and the baking time is only five minutes longer, for a net time savings of 25 minutes. The frozen pie costs $6, or $3 more than homemade.

60 divided by 25 minutes = 2.4 x $3 = $7.20 per hour.

At that rate, I say "Buy the frozen pie!"

There are actually two versions of the Time/Money formula. The examples above let you know how much money it can cost you to save time. In a few days, I'll show you the flip side: how much time it can cost you to save money.