Thursday, August 14, 2014

Amy Dacyczyn and the Concept of the Hourly Wage

Poor Amy, I wonder if she realized that she would be referenced all over the interwebs decades after her books came out.

One important concept I picked up from reading The Complete Tightwad Gazette was that of the hourly wage. Basically you figure out how much money you saved doing something, how much time it took you, do some basic math, and come up with an hourly wage.

For example, it takes me 10 minutes to hang a typical load of laundry on my drying racks. Each load saves me 35¢ over drying it in a clothes dryer. I can hang six loads of laundry per hour, making my hourly wage the equivalent of $2.10 after taxes.

It takes me 6 minutes to grind grain and put a loaf of bread into the bread maker. Each loaf of bread saves me $3.09 over the price of the bread that I used to buy (and yes, my bread is the equivalent in terms of ingredients; I think it weighs more but since we get the same number of servings from it I don't factor weight in). I could theoretically make ten loaves of bread per hour, this making my effective hourly wage $30.90, which is more than what I could make if I got a job. Of course, I don't really make that $30.90 per hour because I am usually make just one loaf a day, but it is a useful tool in determining how worthwhile a task is.

Amy made a chart in the book showing other things she considers when calculating whether or not the hourly wage makes it worth doing a task. For example, in my case homemade bread tastes better than store bought bread and my enjoyment of the task is about average. I have an average enjoyment of hanging laundry; while it pays a effective low hourly wage it is high on my priority list because of the environmental savings.

It is easier to do really enjoyable tasks that have a low hourly wage than tasks I detest that pay well (but I might do those anyway).

Amy gives an example of her husband Jim making pizza and how much they save over buying take out pizza, and then calculates the hourly wage. This example doesn't work as well for me because I don't really have the option to get takeout pizza because the one restaurant with vegan pizza is so expensive that we have only gotten pizza there twice. What making homemade pizza does do for me is keep my family happy with the repetitious simple meals we eat most of the time. (Not that they aren't great tasting meals, it's just that a pizza meal adds nice punctuation to the week for teen boys.) I don't calculate my hourly wage for it.

I think it is important to be honest about money saved. When I make a batch of muffins I never calculate my hourly wage based on the price of a muffin at a bakery; instead, I might compare it to a package of muffins for sale at a reduced price at the supermarket, or even another equivalent snack. If I bake a batch of cinnamon rolls I do consider how much cinnamon rolls are at the bakery, but I don't calculate it on a per roll price. If I did that I could say that I saved $43 (three trips for cinnamon rolls minus the cost of one batch of rolls, since I make 12 rolls at at a time) and had an effective hourly wage of $172. Instead, I compare the cost of one batch of cinnamon rolls with the cost of getting cinnamon rolls (and a coffee for Husband) once. One batch of cinnamon rolls with simple icing costs me approximately $6.50 and takes about 15 minutes of hands on time. A trip to the bakery for cinnamon rolls would cost about $16.50 (4 cinnamon rolls at $3.50 each, one coffee at $2.50), so I save $10 and my effective hourly wage is $40.

Sometimes I do calculations for fun. If it takes me 15 minutes to go to a store and use a coupon on a purchase I made two days prior, and my credit is $19.44, then my hourly wage was $77.76 which is an amount I could never make at a paying job.

My reality is that I am a stay at home mom; I see no reason to avoid doing a task that might earn me an effective hourly wage of $1 if there isn't anything else productive (for the household or even just personally) I would be doing with my time. If I could be doing something that saved more money with that same time then I would consider not doing the $1 per hour task, but if I would be sitting on my rear end looking at my computer then I will do it.

To me, that can be the danger in calculating your effective hourly wage and using it to decide to do or not do tasks. Because I don't work outside the home my hourly wage if I am not productive is $0, which means everything I can do to save money is worthwhile. These days I try to put in 8 productive hours daily on weekdays, half that on Saturdays, and as few as possible on Sundays. Some of those hours I might only be "earning" $2.10 per hour, but some of them I might be "earning" $40 per hour, which is pretty exciting.

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