Opportunity Cost of Saving Money
June 25th, 2007 | by admin |For a festival of frugality one would expect to find numerous ways for people to save money. Saving money can actually become an obsessive art. If we are not careful we can spend all our time looking for ways to save the odd dollar and cent, and actually lose track of the wider picture. By all means seek to save money, but in mind these concepts:
1. Prioritise your savings.
Always start off by looking for the best way to save money. For example, if you are a homeowner, Remortgaging offers the potential to save a significant % of your monthly disposable income. As soon as you return to your lenders standard variable rate, make sure you have a plan ready to look for a better mortgage deal. Given the amount of money at stake, it is worth spending considerable time to find best deal.
2. Don’t Forget Time = Money.
It is important to place a value on your time. If you work out a rough hourly pay, you can decide whether money saving schemes are worth it. For an extreme example, you might be able to save $5 by digging up some well rotted horse manure. However, rather than spend 2 hours digging, you might be better off spending $5 to buy some. If you earn $50 an hour, don’t spend several hours saving the odd cent here and there.
3. No excuses for not checking premiums
At the same time, if you put a value on your time, there will be many occasions where it makes perfect sense to look into finding better deals. For example, you may feel you don’t have time to look for a more competitive home insurance deal. However, for 30 mins effort, looking online you could save perhaps $100. This works out at an hourly rate of $200. The only excuse for not having time is if you earn more than $200 an hour.
See also: saving time and saving money