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Cost of your time

How do you decide if a restaurant meal, a repair service or a lawyer is worth their price? One method is to compare how long it takes for you to do the task vs much money you can earn in that same amount of time. Here are some ways to look at the concept of comparative advantage.

If you absolutely have no idea how to do something or don’t have the tools, for example repairing a broken heater, then the cost of learning the skills, acquiring the tools, and making sure not to break anything else might be quite high. In this case, hiring someone at even a high hourly rate is more cost effective.

If you are able to do the work, for example, making lunch, but you don’t have the time because you have work to do, then the calculation is a little different. If you earn $20/hr, and a meal costs $10 and it would take you an hour to make a meal of equal quality, then it’s a good idea to pay $10 for the meal, and thus free up an hour to work and earn $20.

Beyond trading services, a more subtle way to look at these cost savings is with convenience items such as microwaves which heat up food much more quickly than a stove or oven. Each use saves some time, which can be multiplied by your hourly earnings. With enough use, the microwave pays for itself.

Comparative advantage is an objective way to quantify the cost of your time and can help you decide how best to spend your time and money, however it doesn’t mean you can’t learn new skills that can save you money.

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