We have mentioned Economies of Convenience before in other posts. Economies of Convenience is the balancing of time and money based on your needs, values, and lifestyle. Despite knowing how to balance those points, we found ourselves wasteful. Because of this, we feel it is an important enough concept that we want to dive into it further. We will discuss how that waste actually can make cheap things very expensive, hurting our pocketbook.
Spoilers and TL;DR;
This post is longer than we like. Why? Because to understand an economy such as convenience, you have to set some context. If you are looking for the takeaway and how to save on costs, skip down to Our Learnings. If you want to understand how we unpack on this topic, read on.
Opposing Forces
There’s a saying, “You can have it quick, cheap or done right. Pick any two”. Why do folks say that? Because it is true! Those are three opposing forces all of us consumers face. By consumers I mean any person or thing doing trading goods and services with another person or thing. That is what an economy is; barter of time and materials with another person or business.
The balance of these three forces is how we determine personal value. If you break your leg, done right and quick, will take precedence over cheap. You will go to the ER, get pain medication, have the leg set correctly, and you are willing to pay a premium for it. Because you are willing to pay almost anything to stop the pain and fix the leg, it is a perfect example of an inelastic demand curve.
In another example, your vehicle may need an oil change. That is not extremely hard to do, but it is time consuming if you include buying parts and getting rid of the waste oil. In this case, it may be cheaper than going to the dealer, and you can do this as well as a technician. Still, there is a tradeoff of your time to do the work.
Where It Becomes Gray
Let’s face it, sometimes, you just get hungry and want a burger. You absolutely must have one before you become hangry. That makes your overriding priority. Still, you have a choice to make; cheap or right. Ok, that is admittedly, a strange thought. What is ‘right’ when it comes to a burger? Does it need to be wagyu beef on a toasted brioche bun with micro-greens and bacon jam? Or can it be something out of a gas station hot case?
Let’s go back to our oil change example. We can go out, buy factory parts, tools, and spend our time changing our oil. We will need to run the errands of getting those items first, then do the work, then do the clean up. Finally, we take the used oil and hopefully recycle it. That is a lot of trouble, time, and money for one oil change. If we have our vehicle for 5 years, and have only invested in tools once, buy supplies once, in bulk, then it might be more viable.
Ah, but yes, other places can change the oil in your vehicle as well. They use dealer grade parts and have lower labor rates. But if we chose that option, will it be done right? That depends on how you define being right. Do they save more time? That depends on your schedule and how urgent you need that oil changed.
The Chains
First, let’s eliminate the idea of bartering from our conversation. That is a complete economy of its own that needs its post. For our purposes, when we purchase something, we will use money. The work and/or goods we produce determine our income and money. When we pay someone, that is for them, or more importantly, the chain of people and value they add to the thing we are buying.
Chain of value-adding people is key to the high cost of buying items of convenience. Durable goods such as cars and washing machines are good examples of value adding chains. The goods we buy are sourced from all over the world. At each step, each piece adds cost to the final product. For example, if someone produces the tires for a vehicle, they need to be paid, as do their sources. Every step, every part, has to be made and shipped and assembled. That’s a lot of folks with hands out.
Now, let’s pick one that is not so obvious. What about a McDonald’s Big Mac? No, we aren’t picking on them exclusively, but they are so ubiquitous they are relatable for most people. When we buy a Big Mac, we are paying multiple premiums on that food. There is a large chain of people involved in making sure you get your tasty Big Mac promptly. Those toasted sesame seeds on that bun didn’t toast themselves.
The Obvious
Every time we make a purchase decision, we are deciding what amount of right and how quickly we are willing to pay for it. We all make those decisions every day. In general, we probably don’t think about them. Many of us don’t think along these lines actively, but we all do process the data we are given as a set of trade-offs.
When we are in the store, we may choose a high-end brand name product or a less expensive generic. In each case we are actually making a choice of what ‘done right’ is from a product pov. We place a monetary value on that choice. The monetary decision is based on how much we value something versus how much the rest of society is willing to pay for something.
Enter Convenience
We are often willing to pay a premium for a quicker reward. The same goes for buying time back. If you are working 45 hours a week, have a couple kids, and hobbies, time is a precious commodity. Time is finite and the demand curve we have for it can be very inelastic. Doing some research yields that an average person splits between 80-90% of their time between work, household work, and human needs, that doesn’t leave a lot of free time.
A callout on that data. That sample feels skewed but as with all things health related, it is a best guess based on a series of polls. The group sampled was between ages 15 and 64 and may or may not be employed. There is enough common knowledge around sleep, and work life balance, to contradict some of this. That being said, the trade, in many cases, would be an increase in work and commuting at a loss of sleep instead of additional free time, which would lead to the same problem of limited time.
With so little time, many are willing to pay for services that can’t perform or simply don’t have time for. Don’t have time for dinner? Order out! Don’t have time to clean? Hire a cleaning service! Want a date night alone for two? Hire a nanny! But what are the actual trade offs?
Time vs Money Pitfalls
When we pay money for goods, many times, we are expecting to get time back. That doesn’t always happen. Why? Consider this:
- Our money supply is generated through us spending time earning.
- Because society considers some skills more valuable than others, we earn different amounts based on our work.
- When we purchase an item, it usually comes with a chain of value adders that drive up its price, making it a premium product relative to what we may be able to do on our own.
Why do these items matter? Because your money is directly tied to your time. That is what money is exchanged for. You have knowledge, goods, or other items you have invested your time in. Sometimes the trade offs work, and sometimes they don’t.
Examples In Numbers
Let’s do some math. Doug makes $40 an hour. Doug has two kids and a domestic partner. We will say if Doug chooses, he can make dinner for 4 in 45 minutes with $15 of ingredients. The other choice is that Doug picks up food on his way home, which costs him 15 minutes of time and $10 per person plus a $5 tip.
The cost of each meal is not only in the dollar cost but the time cost. Doug values his time at $40 an hour. That means if Doug spends 45 minutes making dinner, his time value is equivalent to $30. When you add $15 of ingredients to that cost, you get the meal for 4 being $45 of his time.
Conversely, if Doug opts to pick up food, it is more expensive. Fifteen minutes is equivalent to $10. That means the meal cost him $55 of his time. In this case, what looks like a time buy back costs someone more than they value their time at.
Now we look at Ann. Ann has a similar domestic arrangement. She makes $80, which is double the value of time when compared to Doug. That makes the meal made at home worth $75 worth of her time. The meal out would equate to $65 worth of her time. In Ann’s case, she is buying back her time, but really, only $10 worth. If she were to make enough for leftovers, it might still be worth her time to make the meal at home.
Our Learnings
As we started to re-evaluate many things in our life, we built out a calorie budget. The first outcome from that was we had to stop eating out. We had used restaurants for convenience, thinking they were saving time. At our cabin, we had to start cooking more as well. We decided to use some discount grocers as they were a one-stop shop in those less urban areas. At the same time, we were tracking our budget looking for what we need for retirement. A funny serendipitous thing happened.
Both the amount we were spending on going out and our groceries went down significantly. By being calorie conscious, we cut our eating out, which led to eating in. Looking at future retirement needs made us look at being more price conscious. This led to a further reduction in cost. Interestingly enough, we didn’t lose time waiting in lines or for someone to prepare a meal for us. Finally, it made us look at other areas where we were paying for convenience.
Tips And Traps
Finally, we come to some tips and traps from our learnings. Hopefully they will be food for thought for others.
Tips:
- In terms of ‘Done Right’, premium products may not be worth it. Most products have generic or house brands that are just as good or close enough.
- Before making a purchase choice, think about your time and what it is worth. If something is going to be 8 hours of your time, you are saying it is worth a day working to have it.
- By planning, you can cut down the need for urgency, which usually comes with a trade-off of a higher price.
- Look around your home and ask yourself if every product is needed. Many home products are easy to make with items we have on hand, are just as effective as store-bought.
- Block out time to make a menu or craft items on your calendar so you can stay ahead of needs
- Be intentional in how you spend money, meaning know what your time is truly worth.
Traps:
- What we perceive as time saving may not be when weighed against other trade-offs once we think about the total cost of that item..
- Commit to doing things more than once if they require an investment in tools and supplies. If you don’t, those tools and supplies will make the initial time you do something more expensive than it is probably worth.
- Not defining ‘good enough’ before we start a project or even eating out can lead us to overspending.
- Prioritizing ‘Cheap’ for items when we should prioritize ‘Done Right’ can cause us to re-spend the same time and money over and over.
One Last Musing
One outcome for us from our learnings was in how we approached a more intentional form of spending our time and money. We came to look at some items as challenges to be solved through hobbies. For us, we decided to make things like making hot sauce, beer, sausage, and jerky part of our things that were fun to do. When we do this, the time cost is reduced for both the hobby and what it produces. For example, if you fish, and you eat fish, while not a convenient thing to do, you help fund your meals while enriching your life via those hobbies.
Wrapping Up
If you are still with us, we thank you for your patience. This is not a simple topic. The takeaway is there is a cost for convenience. There are times that cost makes sense and there are times it does not. By learning to value your time, and understand what is ‘good enough’, you can better address your budgeting. Further, if you can use your hobbies as a way to cut down the need for convenience items, you can reduce your overall spend of both time and money.