When Should You Buy Convenience?

by Paul Ruedi

 I have always said that money doesn’t make people happy, but it sure does solve a lot of problems and buy flexibility. These days with more and more households requiring two incomes to make ends meet, people are often looking for ways to outsource tasks that take up their time. Things like yardwork, cleaning, and watching children often are the first to be outsourced. Though this may seem like unnecessary extra spending since somebody in the household can do it for “free,” there may be a good financial justification for outsourcing tasks.

Suppose a family wanted to hire a cleaning service to come over and clean their house once a month for $200. The sticker shock may sound like a lot, but if it saves a person from doing 8 hours of cleaning, it prices those hours saved at $25 per hour. If the person who would have otherwise cleaned the house can make more than that per hour (after tax) he or she would be better off outsourcing cleaning to spend more hours working to earn a higher amount.

I suppose that was a little too perfect of an example, because in reality a person likely won’t work the exact hours saved to make up for any spending on convenience. Though it may not happen every day or week, spending less time and energy on cleaning the house allows you more time and energy to advance your career, which can overall make you better off.

But if you do not have the opportunity to earn more money in your career and have extra hours to spare, then you may want to save those costs by doing things yourself. If someone in the example above makes only $15 dollars per hour at their job, they would be better off to save the $25 per hour on cleaning and do it themselves.

This is just one example but I can think of several more. I think one of the most common decisions people wrestle with is whether to work and pay for childcare or designate a parent to stay home and raise children. Though I can’t possibly cover all the emotional sides of that decision, the financial side is the same: can that person make more after-tax income than the cost of childcare. There is no one-size-fits-all answer when it comes to buying convenience, so people should always be aware of the numerical side to make sure they are doing something wise, not something frivolous.

Paul Ruedi is the CEO of Ruedi Wealth Management in Champaign, Illinois.