Have you ever read a personal finance blog for money saving tips? How about trying to DIY a home improvement project?
Saving money is important — If you’re not financially independent, boosting your savings rate higher is the easiest and surest way to reach financial independence faster.
But DIY’ing isn’t always the right answer — sometimes the capitalist machine is so efficient it’s often cheaper to Buy rather than to DIY.
Most frugal life optimizing tips fall into these two categories like neat little Tetris blocks — How to buy stuff for cheap, and how to DIY to save money.
Many of life’s big money decisions boil down to this very basic question: Should you DIY, or should you buy?
(Insert repetitive but addictive Tetris music here)
The Three Camps
In general, people fall into three camps — The first camp of people is those that firmly believe in DIY’ing everything they can to save money.
Let’s call this the “DIY Everything” group. It’s a noble camp of people — They’ll tradeoff precious leisure time to make their own soap, build their own furniture, synthesize their own biofuel, brew their own beer, and grow every last vegetable in a backyard garden.
The results from this group are often impressive… but the pile of backlogged DIY projects seems to grow year after year. They just don’t have enough time to do everything.
In the second camp we have the “Buy Everything” crowd. This group feels most DIY activities are a poor use of time — they could easily earn more money by spending additional time working or creating a side-hustle to generate extra cash.
This group of people can often be found in restaurants and bars running up large bills instead of working extra hours or starting side-hustles. Oops!
All kidding aside, most people actually belong in the third camp of people. A group that tends to do BOTH a little DIY and a little buying.
This “middle of the road” path gives ample opportunity to make time-value tradeoffs…. but are you really making optimal use of time and money?
Ultimate how you make those tradeoffs is entirely up to you. It’s your time and your money. Far be it from me to tell you how to run your life.
However, I constantly see people making mistakes when it comes to calculating DIY-or-BUY trade offs. They miss all kinds of “hidden costs” in their calculations, and tell themselves “white lies” associated with these activities.
Today I’d like to bust-out The Big Flashlight of Truth, and shine a little light on some of these “hidden costs”.
1. Faulty Time Value Of Money Calculations
The first one on my list is a “white lie” frequently used by the “Buy Everything” Camp. When confronted with a DIY or Buy decision, they surmise that because they earn $75/hour at their job, any DIY activity earning less than $75/hour is no longer worth their time.
This reasoning has some serious faults — for one, most people can’t endlessly add paid hours to their employment. Either you work a salaried job where the amount of hours worked doesn’t change your paycheck, OR you work an hourly job with a fixed number of hours (usually set by the employer at 40 hours per week).
What most people have left to work with is leisure time. After all the commuting, grocery shopping, errand running, and other activities that fill-up a day, leisure time is simply what’s left. Most people I know only have 4 to 5 hours per day of leisure time. That’s it!
What people really need to be calculating is the time-value of their leisure time.
Yes, you can start a side-hustle in your spare time to make a few extra dollars — but most side hustles aren’t going to come anywhere near that $75/hourly rate. Don’t fool yourself. You might make less than minimum wage!
What’s your leisure time worth if you spend most of it watching TV? Basically — $0/hr. That means any DIY activity you engage in could be worth your time.
2. Sustainability Is Hard!
The next “white lie” on my list is Sustainability. Sustainability (in this case) is the ability to sustain a DIY money saving activity for a very long period of time.
Most people suck at sustainability. They’ll start a DIY activity in their leisure time, and actually succeed for a little while. After a few go-arounds they’ll quickly tire of the activity or “get busy” and it’s here that the money saving ends.
This is unfortunate because the real dollars in DIY savings can be found in sustainability — repeating that same money saving activity for a decade or more.
This is exactly why I wrote my Sticking With It post — One of the biggest and easiest ways to save money in a household is by cooking at home consistently. Yet, in my experience few families go longer than a week without eating out. Sometimes it’s only a couple of days between restaurant visits!
I recently started keeping track of how long it’s been since we ate at a restaurant using my “Days Since” widget over in the sidebar. At the time of writing this, it’s been 28 days.
3. Conveniently Forget Tool & Depreciation Costs
If you choose to DIY something, chances are you’re going to need tools. Whether it’s a sewing machine, gardening tool, a soldering iron, or even just pots and pans — nearly all DIY activities require some kind of tools.
Tools (as I’m sure you know) cost money. Sometimes A LOT of money. It’s the tools, or rather the depreciation of the tools that I often see missing from most DIY cash flow calculations.
With tool depreciation costs included, DIY returns are often far lower than what’s initially projected. Yes, let’s not lie to ourselves — no tool lasts forever. Eventually they all need replacing!
One rule of thumb I like to use: Unless the DIY activity can recover the cost of tools in 3 to 5 years, it’s probably not worth your time or money.
Remember, you’re not saving any money until you fully recover the cost of the tools involved. Although, it certainly helps if most of your tools are free.
4. What Energy & Fuel Costs?
Another “hidden cost” I see missing from most money calculations is energy costs — the cost of fuel, electricity or natural gas required.
When cooking at home, are you calculating the cost of running the oven for an hour? Energy isn’t free! Likewise, if you go to a restaurant for dinner are you calculating the cost of the fuel for your car?
It seems obvious, but I rarely see these costs properly accounted for. So don’t forget!
Find out how much a gallon of gasoline costs or how much you pay per kilowatt hour for electricity and add these costs into your calculations!
5. Instantaneous Travel Time With No Wait
Here’s one I see frequently “forgotten” by the Buy Everything crowd — Travel time and waiting time.
Stop me if you’ve heard this story before — You and your significant other hop into the car on Friday night for dinner. After 20 minutes of driving, you make it to the restaurant. Then it takes 5 more minutes to find a parking spot.
Once you step into the restaurant you have to put your name on a list. It’s Friday night, so it’s crowded. The hostess tells you it’ll be 30 minutes of waiting until your table is ready. So you decide to wait… and your table is finally ready after 40 minutes of waiting.
Then you sit down, order your drinks and food — Another 10 minutes gone. Then there’s another 20 minutes of waiting until the meal is delivered.
After all that, we can’t forget the drive home — Put another 20 minutes on the clock.
The total cost in time for a meal-out can easily add-up to two hours or more. Cooking at home can often be faster than eating out!
Don’t forget to include travel time and waiting time in your calculations!
6. The Entertainment Factor
Alright alright, I know most of the people in the DIY Everything camp are just waiting to tell me “But I do it for fun! It’s a hobby too! It’s not just a way to save money, it’s entertainment!”
Yeah, OK. DIY activities can be fun, but most hobbies aren’t activities that get sustained long enough to really save money or cover tool depreciation costs. Usually hobbies end-up costing you money … which is totally OK!
But let’s not kid ourselves into believing it will actually save much money. It probably won’t.
This is exactly why I believe most “money saving” hobbies should be tested against the 10,000 hour or 5 year test — If you’re not willing to engage in the hobby for 10,000 hours of your leisure time, you won’t really build-up significant savings (or recover cover your tool costs).
If it fails this test, just call it what it is — a temporary fun hobby that’s going to cost you money.
It really all comes down to decisions. The difference between having wealth and not having wealth is about making decisions. Make the “right” decisions and you could end-up with a bunch of spare cash in your bank account. Make the “wrong” decisions and…. it’s debtor’s prison for you!
So it’s important to get your facts straight — Without having all the costs properly accounted for, making good DIY or Buy decisions is going to be hard.
So is it better to DIY or Buy? It really depends.
In my experience, capitalism is incredible at putting goods on your front door for a very low cost. Most people can’t compete with low cost labor from automated factories or giant farms when all costs are accounted for.
That said, quality is often lacking. This is where DIY really fills the gap. Whether it’s growing heirloom tomatoes in your Economic Garden, making your own fancy soap, or building your own furniture — DIY is how you find quality these days without spending a ton of money.
So instead of asking ourselves “Where can I save the most money”, perhaps we should be asking “Where we can I DIY the biggest improvement in my quality of life?”