I've been thinking lately on the cost of time, more specifically the cost of my time.
What do I mean by that? Cost of Time? Huh?
I was first introduced to the concept of time costing something with Mr. Money Mustache's classic article, The True Cost of Commuting. If you haven't read it yet, stop reading this article and go read that one. Trust me, it's worth it. This will still be here when you're done.
Finished reading already? Awesome. Let's discuss.
He brings up three excellent points about commuting:
-the flat rate of driving the car (both as set by the IRS for mileage, the cost of the gas, and depreciation)
-the amount of time wasted
-the cost of the time spent driving the car.
The cost of driving a car is pretty easy to calculate. The reimbursement rate set by the IRS for 2016 is $.54 for every business mile driven. Drive 200 miles and that's a cost of $108. Since I bought my car Levi for $8000, and have put roughly 70,000 miles on the odometer since I bought him, I'll use the rate of $.11/mile in depreciation for my calculations. While my MPG has fallen from a high of 32, he still gets a decent 28 miles to the gallon. The average cost of gas around me is $2.10 right now, which means I pay $.075/mile in gas costs. Altogether, every mile of my car I drive costs me $.725 (although that goes down the more I drive thanks to the depreciation of more miles).
People fail to realize the time wasted in the car every day. I used the information in MMM's article to my advantage in my last move. I picked an apartment that is only 1.5 miles from work, so it costs me only $.23/day in gas for my commute, and even less when I ride my bike. But the real advantage of a short commute to me is less time wasted in traffic. My daily commute is 10 minutes. Not one way, total. With construction in full swing, traffic is a mess in my area. If I lived further away, I would waste even more of my time navigating between orange cones and waiting in line to turn at a horrendously over used intersection.
Living close by saves me money in addition to time. Not just on gas, but in terms of more time to do things. In my case, I rarely use this added time for anything more productive than a longer nap after work, but I'm trying to change that particular habit. My MegaCorp employer values my time at almost $45/hr when all is said and done, but I'm far less productive when I'm sleeping, so I'll use $25/hr for my rate of pay for myself. My current commute costs me about $4. If I lived downtown (35 minutes away), my commute would cost me $15/day. That's the equivalent of eating dinner out every day! Yikes!
At the risk of sounding like an ACT prep question, I also decided to apply these principles to other areas of my life. More specifically, while traveling.
Previously, I celebrated finding a cheaper, direct flight to my destination at an airport in a nearby major metropolitan city. I saved so much money! But……. did I really?
Let's compare and contrast an upcoming flight. I'm going to FinCon this year in San Diego (and I'm super pumped!). Somehow, I need to get there. I am definitely not driving, so I'm going to fly. I have two options: I can drive 3 hours and catch a cheap direct flight, or I can fly out of my home airport on a more expensive flight with a layover (albeit one in Las Vegas).
|Flight A, the Hometown Hero||Flight B, Savings Sally|
|Airline Ticket:||$327||Airline ticket:||$176|
|Total travel time:||9 hrs, 20 minutes||Total travel time:||10 hrs, 20 minutes|
|Car cost:||$29 (40 mi x $.725)||Car cost:||$290 (400 mi x $.725)|
|Car time cost:||$25 (1 hr drive time)||Car time cost:||$150|
|Parking:||$30 ($6/day x 5 days)||Parking:||$37.50 ($7.50/day x 5 days)|
Look at that! What looks like the obvious winner from just the price of the airline ticket, Flight B, is actually the more expensive option! If we're just comparing the cost of the miles spent traveling, Flight B costs about half what Flight A does (28 cents v. 58 cents per minute). But, throw in all those other expenses (6 hours of drive time, more expensive parking and more wear and tear on my car) and Flight A jumps up to almost exactly equal Flight B (73.3 cents v. 72.6 cents per minute). With Flight A, I could replace my car costs with a flat Uber fee of $20 each way, which would save me an additional $40 in costs. Then, flight A would be only $.66 per minute, making it the more economical option, even though the flight is more expensive.
I should also mention the times of Flight A are much more reasonable. Leave my home airport around 1045a (which means leave my house by 830a) and arrive back home 515p that Sunday (which means I'm back at home by 6 at the latest). Were I to take Flight B, I'd have to leave 5 hours before my flight time, and add an extra 3 hours after I get back in drive time. I'm not sure about you, but the last thing I want to do after a flight is drive 3 hours. That means I'd get home at midnight!
Flight B requires $650 and 15 hours of total travel time.
Flight A requires $411 (or $367 with Uber) and 9 hours, 20 minutes of total travel time.
I wish I had done this kind of analysis for my flight to and from Seattle this weekend. Instead, I'm stuck flying back into mega metropolis city at midnight on Monday, and arriving home at close to 330a. I'm more than likely going to be grumpy and bad-tempered (more so than usual anyways) at work on Tuesday, which I'm sure my coworkers don't appreciate. But hey, I saved $150 on the flight!
Have you ever spent more in an effort to save? When did you learn cheapest wasn't always the best option?