A popular theory states that something is not worth doing if it makes you less that your hourly wage. For example, if you make \$30 an hour and you can hire someone to mow your lawn for \$20 an hour, you should go ahead and pay for the service. As someone who is earning more and yet trying to combat lifestyle inflation, I’ve been struggling with this idea. According to this rule, all of a sudden I can start paying people to do all kinds of stuff for me. Laundry. Cooking. Cleaning. Or can I?

Thought #1: What Is Your Real Hourly Wage?

1. First, roughly estimate your hourly wage. If you work 40 hours per week, a quick way to estimate your hourly wage is to take your annual income, remove the trailing three zeros, and divide by two. For example, if you make \$100,000 per year, then you make \$50 per hour. A person earning \$20,000 per year = \$10 per hour. If you are using gross income then you’ll end up with gross hourly age.
2. Take taxes into account. If you earn \$50 per hour gross, that might be only \$35 per hour net. Someone earning less at around \$10 per hour gross will probably be earning more like \$8 per hour net. Try this net paycheck estimator or look at your paystub.
3. Be realistic with hours. Do you really only work 40 hours per week? If not, adjust accordingly. Now add in your commute time, the time it takes to get ready each morning, the time it takes to decompress after each day. Your job takes up a lot more hours than you might think.

Now, what is your final per-hour wage? If I made \$50k per year, but worked 50 hours per week plus 1 hour total each day for commuting + getting ready, with filing single and taking standard deductions, I’d be down to around \$13.50 an hour. Paying someone to do the lawn for \$20 an hour is not longer a mathematically prudent idea.

Thought #2: Are you salaried?
The premise of the argument implies that you can simply work instead to cover certain expenses. Hire the maid for \$20 a hour, the landscaper for \$30 an hour, restaurant food at \$20 per hour – hey you make \$40 an hour so who cares? Work in your office, and make up the difference and then some. But many of us are salaried workers. If we work 40, 50, 80 hours a week, we won’t earn any more money.

In other words, this only works if you can at the same time make more money elsewhere. Someone who works in their own business or does consulting has much more freedom in this regard. I don’t know if I’m that good at time management to pull this off, though.

Thought #3: Will you always be making as much?
I’ve come to see regard frugality as a habit, which can take years to form. Getting used to paying for everything to be done for you is going to hurt if you want to retire early. If you get used to a higher cost of living, you’ll need a much larger nest egg to generate more income. Living a simple and frugal life now will help make the same life an enjoyable one down the road.

In addition, by doing things yourself you may be learning a skill that can also pay off when you can’t justify paying for it anymore. Gardening and growing your own food is a skill. Cooking is a skill. Performing your own car maintenance. Doing your own home repairs. And so on.

Not Just Math
Obviously, if there are activities which you prefer not doing, or can simply be done by someone else for a fraction of the cost, it can definitely be worth it to outsource. Childcare is a common example, although some do it for the socialization. Besides cost and skill development, I would also adjust for personal taste.

For one, we are considering putting in our own hardwood floors in our new place instead of paying for installation. It will probably take us a lot longer than professionals to put it in. Although we’d be saving at least \$10,000 in labor costs, and we’d probably earn more in our regular jobs if calculated on an hourly basis. But I will be learning a lot about home remodeling during this project, it will be a nice respite from staring at a computer screen all day, and it will be personally satisfying.

On the other hand, I hate driving in traffic. I learn nothing from doing it more. If I had access to good public transportation, I would totally pay for it. Similarly, driving around for an hour to save \$10 on an item is not going to be worth it to me. However, I love bargain shopping online, and I might research for hours on the best model and price on a \$99 item. But I can do that while in my pajamas at odd hours.

Are there some frugal activities that you no longer do after your income increased?

1. mimi says:

I no longer do my own taxes. I used to be proud of doing them and itemizing and everything, but really it took a lot of time. And, I was never as good as my accountant at getting deductions. The first time I got them done, I went with a local chain. They did my taxes about the same as I did, but in 15 minutes and charged me \$50 (at the time it was like almost double my annual salary). But still, the service was worth it to me. Instead of going over the dumb thing 100 times and worrying about mistakes, I just mailed it out.

But when I went with a recommended accountant, I did even better. They charged considerably more (\$200), but are so worth it. They’ve gotten me back for deductions I never knew about. \$200 is like five times my salary hourly, but the work can’t be compared. They are so much better at that stuff.

2. That’s a good example. Some people would say that doing taxes yourself is a good learning activity, but only if you liked that sort of thing. Sounds like it is simply profitable in your case!

I’m paying for a professional accountant this year as well, but primarily due to business stuff that I have which makes things more complicated. Moving is also going to add more forms… blah.

3. Tom says:

I think one of the biggest factors that should be considered is: Will you be productive in your extra free time by outsourcing?

I make roughly \$40/hr and could hire a maid for \$15 an hour. Seems like a bargain. They would free up 2-3 hours of free time on the weekends (when we do most of our cleaning). What would I say I would do with that extra time? I would finish painting, replace some light fixtures, organize the basement, organize my closet, etc. What would I really do with that extra time? I would sit on my butt, watch TV or play some video games.

I highly recommend installing your own hardwoods. It’ll take a lot, I repeat, a lot of time. It is completely worth it, financially and in personal satisfaction.

We still do pretty much everything, however one thing I will not touch is plumbing. I know people say that small plumbing projects are simple, but it’s just not worth it to me to save \$100 and do it myself if something goes wrong. Water destroys everything in a house and that is something I’ll leave to the professionals.

4. Red says:

I fight with this as well, in the long run I think I’d rather retire early than hire a maid, though my SO is fine w/paying \$x00/month to have the house cleaned. I’ve won so far, I imagine it would fall apart if we had kids or moved into a bigger house.

5. Mitchell says:

“Or can I?”

yes, you can, but you’re leaving out some other important concepts. i started to write about them but i realized that i was putting together a seriously huge comment, so i scrapped it. i think it boils down to these two points:

1) how much is your free time worth to you, personally, and can you afford it? if you’re cutting costs and pinching pennies, you’re going to want to cut your own lawn.
2) the common misconception is that you should be comparing your hourly rate directly to the cost of the outsourcing. this is misleading unless you are truly paying someone to do something so that you can, instead, do work to earn your hourly rate.

6. Mat says:

Jonathan,

This is something that I constantly consider, but the more and more I consider it, the more and more variables come in to play.

For example, if you assume that extra time put in at work could potentially lead to a pay raise at work, how do you factor that into your hourly wage (I believe this is opportunity cost, though my economics terms are a little rusty since college).

Also, consider that mowing your lawn is a form of exercise (if you have a push mower), we all know exercise is a net gain, so how do we measure that?

7. Ian says:

I no longer change the oil on my car. There’s a place that does it for \$30 which, when I subtract the cost of the oil and the filter, is only about \$15 for the service. It takes them 5 minutes and me an hour (counting the time changing in and out of crappy clothes), and I don’t have to deal with storing and disposing of the used motor oil. Well worth it to me.

8. Tom says:

Ian brings up a very good example. Changing oil in your car is a huge pain, yet some people insist on doing it themselves. You can find coupons in the paper for \$19.99 oil changes where they will top off all your fluids and vacuum also.

So if we use Ian’s example, \$20 – \$15 for oil/filter – roughly \$5 for fluids and vacuum = free!

9. Douglas says:

I have tried to learn how to do everything I can do myself because like Tom said, if I paid someone else to do it, I would probably not do something productive in the meantime. The opportunity cost of this example assumes that your free time is used productively in another more beneficial manner or that you are having it done during times when you are making money. Even on work days, in my after hours, I have five hours per day discretionary time. If I cannot use it to make money or to better care for my money, I use it to save myself money.

For example, Saturday I changed out the AC system on my 1999 Suburban (AC Compressor and lines). I found the parts for \$200 less than the dealership by buying online and used online discussion boards for tips and tricks when I hit a snag. Although it took me eight hours, I saved about \$800 in labor, which is far above my hourly wage, even though they would have finished it potentially faster than I. There is no guarantee that they’ll do a better job than I will.

As for Ian’s oil change, my ex wife used to make me take cars in for service, and at the suggestion of someone I’ve long forgotten I started marking the oil filter with a sharpie to make sure it was changed. Three out of the five places to which I took my vehicle didn’t change the oil filter although they charged me full price, and none of the five places put the 4.5Qts oil in that my engine uses- they just put in 4Qts. My Saturn burns 1Qt/1250 miles, meaning that they put my engine at risk by shorting me that half quart oil.

Sometimes, if you want it done right as in honestly, you should do it yourself.

As a caveat, I will NOT be doing a custom shower in my next home. After having to redo it this winter when the membrane leaked, I decided that standard sizes have a better cost-benefit ratio since the custom work exerts little if any upward pressure on the home’s value when it comes time to sell.

10. More great comments, enough to expand into another post on. I don’t mind seriously huge comments 🙂

Besides the stories of shoddy work (see Jiffy Lube story), the more convincing arguments for changing your own oil that I’ve read show that you can use much better stuff (better synthetic oil, better filters) for the same price or less.

Ironically, I’ve never changed the oil in my own car because I’ve never had a garage or even my own driveway until now. I’ve just tried to change things on schedule and mark my old filters with a Sharpie beforehand.

11. Dan Isaacs says:

Heh. as someone may have said already (didn’t read the other comments) this opportunity cost calculation only applies if you are sacrificing paid time at work to do the task. For instance, if I were leaving early on a Thursday to cut my grass, and would not get paid for my missed work. But since I’m salaried, and can take off an hour or two early on most days with no loss of income, it’s foolish of me to spend money to do something I can do.

Now, when I was working 60-80 hour weeks, including weekends, i just didn’t have time to cut my grass. So I paid someone to do it. but once my schedule got back to normal, I just pay \$120 more a month towards paying off my debts. And I get some more exercise. 🙂

12. 7million7years says:

If you do what I suggest, which is to start a part-time business or find another way to earn additional income, then the cost-benefit is against the opportunity to earn additional income rather than against your current salary … if the ONLY thing standing b/w you and this additional opportunity is some other task that you can ‘outsource’, go for it!

13. Carlo says:

I think another decision factor for outsourcing is the expert factor. Assume your mechanic is trustworthy : If you chose to change the oil yourself, you might miss that your tires are misaligned or your breakpads are wearing thin.

I recently decided to outsource my Apartment painting. I DEFINITELY could have done it myself but in the end, the painters did a MUCH better job that I could have done in 1/3 the time. They also were able to share creative ideas for painting the walls (focal walls, faux painting etc..) that I would not have attempted or even thought of. In my case, much like the accountant stories, the painters provided value add above and beyond what I asked them to do and it was a direct result of them doing it day in and day out.

CARLO.

14. Robert says:

If it’s a choice between sitting on my arse and paying someone to do what I can do, I’d rather save the 20 bucks or 30 bucks and cut my own grass. I’m not CONSTANTLY making what I make per hour on my job, I only make it for 8 hours out of the day for 5 days of the week. If you want to be technical about it, take what you make in a year and divide it by the number of hours in a year instead of during a regular work week. 100k/8760 = 11/hour. So if you make 100k a year then for every hour of every day of the year, you make only 11/hour (roughly). Now does it make sense to pay someone 30/hour to do something you can do yourself for 11/hour? I change my own oil, breaks, wash my own car, cut my own grass and anything else I can do to avoid paying or over paying for the job. I’m not saving any money if I don’t have anything else to do with that time that could make me more money.

15. Mat says:

Robert,

I still think we are simplifying the situation. That non-working time at 11/hour doesn’t take into account the relaxation/time with family/fulfilling hobby that makes you able to work better and get a promotion at work, increasing your pay per hour in the future.

I think there are two types of people on each extreme. There are those who will outsource nearly everything so that they can work alot and actually relax in their very little free time, making the assumption that if they are currently overpaying for some outsourcing, that will be offset out by the career gains they are making by working more.

On the other extreme there are those who will outsource absolutely nothing and spend a great portion of their free time accomplishing these tasks, letting it cut into their career but saving money in the mean time. There are only so many hours in the day to split between career, household chores, and relaxation.

So to conclude, it seems to me that it depends on your career aspects. If one feels they have potential, they will be more likely to outsource now, even if it means a net loss at the current time. If one feels that their career will stay stagnant, than it makes more sense to cut out some career time and put household chores in it’s place to save money.

16. Mike says:

I’ve never really bought this time calculation stuff either. Most of this extra time would not be spent productively. However, thinking about quality of life is a far more important factor. There are things I absolutely hate to do — snow shoveling is high on the list, for example. Paying someone else to do that makes me poorer and happier. Doing my own oil changes…. that’s just insanity. Saving money isn’t about tiny amounts here and there that take huge effort. It’s about living a lifestyle overall that is within your means.

17. Mike says:

PS. Jonathan — haven’t you heard of TurboTax? It can handle moving expenses in about five seconds. See, taxes are something I don’t mind doing myself at all. Too each his own.

18. aa says:

\$1 saved is \$1 saved.

19. arz says:

You can’t compare your hourly wage on these kind of things because they are apple against oranges. Say if you are a wage/salary earner making \$40/hour on your 8 hour/day job. You want a maid to come to your home and help you to clean for \$15/hour. \$40 vs. \$15, or even \$35 after tax vs. \$15 seems to be so easy to decide. But they are not comparable at all. You need to compare your opportunity cost of those time when you actually doing cleanings (on weekends), rather than the time when you are in your cubical with shirt and tie. After all, can you skip one hour of your regular 8 hour day job and go home and clean? Probably not.

So what is your worth when you are home cleaning on a Friday afternoon? It depends. What will you do if you don’t have to clean? Slake off? Take an extra nap? Playing with kids? Going out and have some fun (now you are actually losing money by those hours).

Unless you use those freed up time to do some extra works. For example, building your own blogs or side gigs to generate more cash. So, opportunity cost really means you literally maximize your potentials to replace those specialized jobs that you don’t necessarily do well anyhow. But procrastinating without realizing your potential really can’t be counted (or rather, should be counted at \$0/hour).

Another issue for most people who choose to change oils and do other choirs is that they simply don’t have the disposable income to outsource those things. When you really have no money to hire a maid, what do you do? Clean your own stuff. Or, even better, take a nap.

20. Dan says:

This is the kind of mathematical premise that my high school math teacher would attribute to a “meticulous moron”. In other words, a very logical sounding premise which is completely wrong. The only things which should factor into this kind of money-saving decision is a.) do I have the time? & b.) can I do the job competently? Obviously both of these questions are somewhat subjective, and there is no standard formula to apply to everyone.

21. Tom says:

I like Nick’s calculation for your hourly wage:

http://www.punny.org/money/putting-a-hard-dollar-figure-on-your-time/

And yes, Jiffy Lube does have some horrible stations, but there also some very good honest stations out there. I just got my oil changed from a Jiffy Lube the other day and they showed my my old oil filter, showed me the oil dip stick and went over everything with me. Check angie’s list for recommendations, that is a great website.

22. Good Post.

I wouldn’t be surprised if your feelings change more with time. In our 20s we would never hire to do anyone to do anything (we actually made more money as we both worked then – six figures). But we were used to being broke and doing things ourselves.

Now we’ve had kids for a few years and our time has become so much more valuable. We outsource a lot. For example, we hired a gardener a few years ago to take care of the lawn – BEST thing we ever did. 5 years before I would have never been able to justify that expense. I would roll my eyes at all our neighbor’s gardeners. LOL. Funny how things change.

The thing for us though is though I am salaried I also get paid overtime. & I don’t have a long commute, stuff like that. So I only have to work 2 hours a week to pay the gardener (OT if I like) and believe me it saves me a LOT more time than that. But more importantly I will enjoy my time at work 10 times more than doing yardwork. I just HATE it. Which is another factor. It allows me more time to do what I enjoy; less time doing that which I do not enjoy.

Plus, this was just looked on as a temporary expense, while the kids were young. As they age, we will make the yard work a team effort. But when they were infants, my time was more valuable, since yard work time took time away from them.

I don’t look at any of these kind of splurges as permanent or long-term, and I think that helps immensely. If I made less money I couldn’t justify the gardener. He’s first on my list to lay off if times are bad, etc. & like I said, when the kids are older, I doubt we’ll keep him around anyway. I don’t mind doing yard work if I have some help, and I want to teach my kids to be self sufficient.

Likewise, I grew up in a house where my dad insisted on doing EVERYTHING (he grew up very poor). I think my parents did a bad job on some things, like tile work we had to rip out and redo a couple of years later. & with time his wage has gotten so high, the idea just got more and more ridiculous. Just pay someone to do it right!!! Since I am not very handy, I rather pay someone to “do it right” anyway. I think my folks tend to be a little pennywise/pound foolish in that regard. But at least my dad enjoys the work. If he enjoys it, more power to him. I don’t enjoy it and that makes my time that much more valuable.

23. P.S. Hehe – I hear you on the oil change – my dad thinks I am crazy to go to JL and I think he is crazy to do it himself.. Though honestly, if I were laid off, I would do it myself too. But with a good paying job I see the whole thing an utter waste of time since I can pop by jiffy lube on the way home for a few minutes to get an oil change. I don’t have to ruin my clothes, spend twice as long doing it myself, shop for the oil/filter, and figure out how to dispose of the oil. \$30 well spent if you ask me.

But I would do all those things if I had no money. Indeed. & that is exactly why my parents got in the habit, long ago, of just doing it themselves.

But yeah, that is one my dad and I disagree on today. He would never pay anyone to do something so “simple.” I wouldn’t want to waste my time with something so simple and cheap to outsource.

24. Jon says:

My fiancee has been trying to convince me that we should hire an accountant to do our 2008 taxes in 2009 when we will be filing jointly. I’ve been doing my own taxes since I was 15 and had enough interest income to be required to file. I’ve been using TaxCut to do them since I was 20. Being an engineer I tend to push the software to its limits, trying different scenarios, etc just to see the effect they have on the tax bill. You could almost say I’m a tax hobbyist. She is convinced that I don’t know what I’m doing, that an accountant will somehow find a way to save us money. I think she might be thinking this because I underwithold on purpose (like Jonathan) to invest the difference for a year instead of giving to government a free loan. We are both regular salaried employees receiving a W2, we rent our apartment, and no side businesses. I don’t think there is much magic an accountant can do under these circumstances. Maybe I’m wrong here but I seriously doubt it.

25. Robert says:

I agree with Dan:

The only things which should factor into this kind of money-saving decision is a.) do I have the time? & b.) can I do the job competently?

26. Maury says:

I pay for a fertilizer service (I still cut my own lawn). They just have access to cooler chemicals than I can get. They are expensive though, and every time I get the bill I think I should go back to using the spreader and buying a bag of fertilizer from Costco.

I have friends who pay for house cleaning, but the problem with that is, most of my house cleaning problems are clutter related and not “cleaning” related. If a cleaning person doesn’t know where to put the clutter, then I’m really not gaining anything.

I have my oil changed just because it is cheap. I also have my car washed because it is pretty cheap. Darn near everything else I do myself… I may consider hiring a painter if the job was big enough and I would also hire out most jobs that would require specialized tools or could be hazardous (e.g. roofing) I did however lay my own tile in an entryway, which turned out ok, although I’m not sure I saved that much money.

At the end of the day, I’m too cheap to pay for just about anything… I realize that may end up costing me money in the long run though. I could be doing better things with my time than mowing the lawn.

27. Miranda says:

I agree about the taxes! I hired an accountant this year, and it was so much easier. I think that one also has to factor in intangibles when making these sorts of decisions: How much will the task stress you? Will you be able to do it as well? How much family time are you sacrificing?

28. dong says:

While I certainly don’t advocate working more hours, I think the value working more hours still exists even when you’re not paid overtime. Getting more done at work does usually lead to recognition and as a result promotions and raises.

Personally though I have a hard time hiring others to do stuff I can do myself. It just doesn’t feel right to me, but I probably should get over it since it’s really a more efficient allocation of labor and time.

29. Ellie says:

Haircuts! My boyfriend and I used to cut each other hair; it saved \$50 or so every few months (\$15 for him, \$35 for me). We ended up with some truly ugly cuts tho, so it’s worth the extra money to outsource it to someone else.

30. Schlotz says:

Eating out is outsourcing!

Though I enjoy a nice meal out every now and again, I cringe at spending \$7.95 (+ tax/tip/time for travel etc) for an omelet that would cost just about a \$1.50 if I cracked an egg at home. And it’s healthier as well – have you ever seen a restaurant’s breakfast griddle?!

31. gt says:

i rent a townhouse. the \$\$ is well spent! the landlord’s hoa fee pays for cutting the grass, doggy doodoo bags, trash, water so i can wash my car for free, etc. plus the ll had to be home for the plumber when the roof leaked, home depot guys when the sgd was replaced, window people for when the windows were replaced, etc
having a landlord is the best use for my time

32. Jonathan;

You have correctly identified that there is a fundamental flaw in the outsourcing rule, but you have failed to identify the that the flaw is in the very rule you’re quoting. The flaw isn’t in the results, it’s in your thesis.

You should not outsource tasks that cost less than your hourly wage, you should outsource tasks that cost less than the value of your free time.

This value inherently works on a sliding scale which covers all of this back and forth “corner case analysis”.

33. Gideon Flores says:

nice post!!!

i really think that you must be careful of outsourcing of the cost thats less than on your regular wage, i think its unfair for others that are working from their outsource task.

34. Chris L says:

I have begun to pay for services. I am almost ashamed to say it but I use a service called “dinner by design” to get pre selected meals. They are fresh ingrediants like Parmesean crusted Chicken. We freeze these because my husband and I both work full time and have children. I do not want take out, that is unhealthy but to prepare a home cooked meal takes a LOT of time. These are fully pre prepared. I just defrost in the fridge that day then pop it in the oven. I steam a vegetable and it’s all set. Gives me time with the children. We are also looking into a lanscaping service once a month. We are constantly busy on the weekends with family or other such activities that trying to get the lawn cut is hard for us to accomplish and there are times we miss a week! we have a large corner lot. Our children are 2 years old and 3 months old. We spend the “extra time” with the kids.

-C

35. Jens says:

Most posters hit the point of that to save some money yuo actually have to work while the outsourced job is being done.

As I outsource more things I notice that I get better at getting what I need. It is not always easy to manage other and accept that it gets solved another way than I would have done it. At work I am getting really good at delegating and that is what well-paid leaders do.