A lot of us have likely heard the expression the “time value of money”. This refers to fact that the purchasing power of money changes over time; in other words, money received today has more purchasing power than money received in the future due to inflation, uncertainty, etc. But the topic at hand today is the “money value of time”—specifically, the consideration of outsourcing or insourcing tasks and/or services. There’s a long list of financial writers who will tell you not to pay anyone for doing something you’re capable of doing, even if it requires research and preparation, development of skillsets you don’t currently have, possibly supplies you don’t own, and lots of extra time. I disagree with this sentiment—your time has inherent value, and that value may change as your life changes. Let’s dive in, and I’ll explain.
What is outsourcing?
Outsourcing is essentially paying someone else to perform a task or service on your behalf. It could be something you truly dread (like deep cleaning your house or pressure washing the driveway) or something you just don’t have the time or expertise to accomplish (like detailing your vehicle or doing your taxes). Under either scenario, there is an exchange of funds for services, presumably at a fair market price. This means that you, the payer, are paying what you perceive to be a fair price to the payee for those services.
What is insourcing?
Insourcing is just the opposite of outsourcing—you choose to carry out a task or service instead of paying someone else to do so. This is a great arrangement because you’re getting the service for free, right? Well, not quite. There is an exchange in this transaction as well, only it’s not money for service; it’s money for time.
How do I choose which arrangement is right for me?
This is a tough question to answer because it’s highly subjective. I’ll use a long example to illustrate this principle.
When we moved into our current home, most of the downstairs (living room, hallways, dining room, kitchen, laundry room, and closets) were all painted an ugly golden yellow color. It was so ugly that my wife nearly walked right back out the front door when we first toured the house. Maybe it was a trendy color back when the house was built, but we’re far from trendy when it comes to style! Golden yellow just isn’t our thing.
We loved almost everything else about the house, so we decided to buy it and then repaint those areas before moving in all the furniture. Now, I’m not the best handyman you’ll ever run across, but I can do a half-way decent job at interior painting. And so, the debate began—should we pay an expert to paint or rely on my mediocre painting skills and save the money? As it is anytime you purchase a home, there is a considerable amount of money changing hands, especially if you’re simultaneously selling your old home, which we were. The last thing you want to do is spend money that’s not necessary to get you out of the old place and into the new place safely and quickly.
When it came to insourcing versus outsourcing the painting, the facts we based our decision on were as follows:
- We had a tight timeline between when we bought the house and when our furniture would be delivered, meaning it would be best if the painting could be done in that one-week window.
- 75% of the painting could be safely completed from the floor or a 6-foot ladder. However, our living room has a vaulted ceiling that’s close to 20 feet at the highest point, requiring a taller ladder (not to mention some good balance and coordination).
- At the time, our son was almost two years old, so getting any extraneous or time-consuming tasks completed was challenging as he wanted to constantly run and play—and a house with no furniture was a perfect place for him to do just that!
- Back then, I was working a demanding job with long hours, leaving me precious little time to spend with my family, let alone tackle home improvements.
Based on the above facts (and some more personal qualitative facts), we decided to outsource the painting to a professional. It was a tough decision to pay someone else to do something I knew I was physically capable of doing myself; however, the money value of my time at that point was high relative to other periods in my life. With all the busyness, we decided that the two weeks it would’ve taken me to do all the painting by myself was worth more in terms of hours spent with the family than it was in dollars paid to a painter. In the end, the painter finished in three days; he even brought his wife and son to help one day, and their attention to detail was incredible! No drips, no spatter, no accidents; all the trim lines were perfectly cut-in, and the nooks and crannies in tough-to-reach areas were nearly perfect. It was a much better job than I could have done with quadruple the time, so we ended up tipping them 25% on top of what we already agreed to pay. All things considered, that money worked out to about $25/hour for two weeks of my time back. Money well spent, plus I didn’t have to worry about buying or borrowing some of the equipment I would’ve needed to complete the job (like a 14- or 16-foot ladder to reach the highest point in the living room).
In summary, deciding to insource or outsource is challenging because it is almost entirely subjective. It’s up to you to determine your money value of time. Is your time worth $15/hour or $1,500/hour? Would you pay someone else $100 to mow your yard to buy back two hours to spend on other priorities? Or on slightly a bigger scale, would you pay someone $1,500 to do your taxes to buy back six hours to spend on other priorities? Depending on your life circumstances and your relative proficiency at each of those activities, maybe your answer is yes to one and not the other—maybe yes to both or no to both. The good news is you are in the driver’s seat to decide what makes the most sense for you!