Outsourcing and your Hourly Rate

If frugality is your new-found way of life, you would always be looking for methods to reduce expenses.  Questions like, should I wash the car myself instead of sending it to your neighbourhood car wash? Or, should I cook at home instead of eating out? Frugal is good, but there must be a balance; one do not want to cross the line and become the stingy Scrooge McDuck instead.

The yardstick I often use is to consider my hourly wage rate to determine if it makes more money sense to outsource certain tasks. It is really straightforward; say your monthly salary is $ 4,000 and you work 5 days a week, 8 standard hours per day. Therefore, your hourly rate is $ (4,000/20)/8 = $ 25.

I used to wash my car for almost an hour every weekend, but not any more. A wash-only service at my local car wash only costs 6 bucks, and I figured that my time is better spent doing something more productive, like reading Personal Money (okay you can probably argue that I am just plain lazy, but from this perspective, it does make more money sense no?). Besides, your local car wash can do it better and faster, saving your precious time. Time is money, so why not outsource in this case right?

no claim discount

On the other hand, I chose to walk in to my insurance company for my car insurance renewal. Took me an hour of round trip from my office to town where the insurance company is located. By doing so, I saved 88 bucks (10 percent rebate) which is pretty close to the median hourly rate of a first level manager in a Penang multinational company.

Of course, if you are a hotshot investment banker or business owner, your time is even more precious to focus on increasing profitability which could be in thousand of bucks per hour. Sometimes, even blue collar jobs’ hourly rate is higher than salaried employee. The other day, I paid $ 110 for a half an hour car air-con system diagnosis and service, while my fiancee recently got her car exhaust piping replaced for $ 190 in under 20 minutes.

There’s an old humour on Bill Gates personal net worth which illustrates my point above.

Consider that Bill Gates made this money in the 22 years or so since Microsoft was founded in 1975. If you presume that he has worked 14 hours a day on every business day of the year since then, that means he’s been making money at a staggering half-million dollars per hour, around $150 per second.

Which means that if, on his way into the office, should he see or drop a $500 bill on the ground, it’s just not worth his time to bend over and pick it up. He would make more just heading off to work.

We’re assuming about 4 seconds to bend down and pocket the bill. Of course he can afford to hire people to follow him and pick up any $500 bills he may drop.

Source: http://www.netfunny.com/rhf/jokes/97/Jul/gateswealth.html

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