I remember back in my college sociology class, the professor mentioned something called the “Mini-Max Rule”. It’s practically universal and works something like this: when people are faced with a choice, they tend to make the decision that they believe will minimize their cost and maximize their benefit. This principle is one of the primary drivers of every choice that people make. It’s surprisingly simple, but it was kind of an eye opener at the time. Even though a lot of times people end up making bad decisions, their thought process at the time of the decision was such that they believed the benefit would outweigh the cost.
One of the biggest challenges I face (and I’m assuming many others face as well) in managing the family finances is finding the right balance between saving money and saving time. I strive to “minimize” the amount of time spent and “maximize” the amount of money saved. I know that I could potentially save more money on things by spending more time on them. But time is at such a premium that I feel like I should really protect it. Last time I checked, there are still only 24 hours in a day, and I don’t want to shortchange my wife and baby to save a few bucks here and there. These decisions will be different for everyone as we all have varying thresholds of what we consider “worth it”, but here are some examples of our decision-making.
Last year I shopped around for new homeowners and auto insurance. I had been happy with my insurance with Allstate. I had used them for my auto insurance since high school, and I really liked my agent. I didn’t think my rates were bad. I know there are those out there that swear by shopping around every year to make sure you’re getting the lowest rate, but I was happy with what I had. To me, I didn’t think it was worth it to spend a few hours online getting rate quotes at a bunch of websites to find a somewhat lower rate. (Time required greater than savings generated)
But last year my Allstate agent retired and sold his practice, and my policies were being moved to another office. At this point, my reason for staying was gone (my agent), and I did think it was worth it to shop around for insurance. I ended up saving around $200 a year on my homeowner’s insurance and about $50 a year on my auto insurance. But even with this, my strategy was to call an independent insurance agency and have them do the hunting. (Time required less than savings generated)
I know there are people out there that go “coupon crazy” and to some it’s worth it. Personally, that’s not for us. We do use coupons, but we don’t spend a lot of time collecting them. To spend multiple hours a week finding coupons (both in the newspaper and online), organizing and sorting through them, and checking through the grocery list to make sure we buy the items with coupons, all to save $10 a week or so isn’t worth it to us. (Time required greater than savings generated)
I’d rather just buy the generic brands at the store and save a similar amount. (Time required less than savings generated)
One-Time Household Tasks
The things I love are the one-time tasks that continually generate cost savings.
Almost every light bulb in our house is a CFL bulb. These do have a higher upfront cost, but they last far longer than regular incandescent bulbs and use far less electricity. Some don’t like the lighting put out by these bulbs. For us, we’re so used to them that it doesn’t bother us. (Upfront cost and time required far less than savings generated over the life of the bulb)
One of our bathrooms has a low-flow shower head, and our kitchen sink has a low-flow aerator on it. As a result, they use less water than standard ones do. Since we are on municipal water, this has a direct effect on our monthly water bill. I should replace our other sinks and our other shower head with similar fixtures. The upfront cost is a bit high, but the installation time isn’t too bad. And over the years, the cost savings really add up. (Upfront cost and time required less than savings generated)
What are some of the choices you make between time spent and money saved? Share your story in the comments below…