Budget proposal: pay yourself

I thought about this just after I cleaned my living room windows and glass door (one of the items that did not make it to my mental to-do list for Pesach). I am really not into housework. It does not interest me the same way trying out new recipes sometimes does. But it has to get done. I haven't had any hired cleaning help in years, though I do now have assigned jobs for the kids on Fridays. Yet, on most days, unless I am purposely avoiding it because of Rosh Chodesh (not to mention Chold HaMoed), I throw on in a load of laundry or two. That does not mean it all gets put away the same day, but at least it is washed so that the children will have clean uniform shirts and socks (should they take the trouble to keep the matches together).

So why the elaboration on laundry? Well, a woman in the area told my daughter that she didn't feel like doing laundry after Pesach, so she just gave it all in to the dry cleaner, knowing that the bill would amount to about $45. Note, this person does not have a job or a houseful of kids, so it was not real time constraints that influenced the decision here. when my daughter recounted this story, my husband cried out that he would do the laundry for $45. Why not? It should take no more than an hour of actual work even if you do fold.

Only if you are the type of professional who earns a hundred or more per hour, and you find you don't have time to spare during your workweek to take care of your own laundry would it make any financial sense to pay someone else $45 for about two bundles of wash. Otherwise, one should consider that they may have to work 2, 3, 4, or even 5 hours to earn that $45 -- before payroll deductions. Consequently, saving one hour on laundry work, in fact, cost more time in earning the income needed to pay for the service. Even if it is about a wash (no pun intended) in terms of your earnings versus the payout, you would still come out ahead in doing your own laundry, as the savings are tax free, unlike additional income.

People like to treat themselves and often think about the small amounts as insignificant in the total financial picture. However, the fact is that they do add up to far larger amounts. So what I would propose to those who do treat themselves while saying they simply cannot save is that they pay themselves for these services and bank the money. Here's how it would work:

Open a savings account to be built up on exactly what you save by doing without these extras. For example, each time you clean your own house, you pay yourself the going rate of $10-$15 hour. Put that money in the bank account right away. You should be able to sock away at least $50 a week from this alone. At the end of a year, that would be $2600. Other savings could build from paying yourself the going rate for raking your leaves, mowing your lawn, shoveling your snow, etc.

You can increase the savings by paying yourself for what you don't spend by foregoing little treats. For example, instead of treating yourself to a $3 coffee for the pleasure of sipping while you shop in the grocery store, make a conscious effort to do without. You can prepare by bringing in your own coffee home brewed for pennies a cup or even picking up one for free at one of the area banks you put your money in. Then you can add those $3 a shopping trip to your savings account. If you forego the home delivery you usually ask for to save your own shlepping, add another $5. Obviously, you have to assess if your desire for delivery is based on real need or something else, but there is not a real need to sip overpriced coffee while shopping. These small amounts can easily add up to $15 a week, which is $750 a year -- enough to buy something far more substantial than a cup of coffee.

If you are the type who needs to feel rewarded for saving, you can divide this type of account so that some of the hundreds of savings go toward the purchase of something you really want for yourself. It may help your forego those cups of coffee if you think about saving up for some accessory you would like or tickets to a play you would love to see, etc. I know someone who kept herself motivated to quit smoking by using the money she saved on cigarettes to buy a piece of gold jewelry. Really, though, the goal is to build up a healthy savings account, so you should try to only use a portion for rewards of that sort and save the larger amount for longer term goals.


Chaim B. said…
Your plan only works if there is an incentive to be an earner because money earned = ablity to purchase more of what one desires. This does not work with some people, e.g. $45 laundry lady, because the spigot never runs dry. They have no reason to be an earner because they can have both the $45 laundry and still have the $ for entertainment or whatever nahrishkeit they want. So with no downside, nothing lost or sacrificed, why not simply use money as firewood or napkins or whatever else makes you happy.
Ezzie said…
I always thought it would be amazing if prices had a floating number above it showing your actual cost - whether because of interest lost to credit cards or interest lost on other utility of the money (investments) or simply the amount of hours you'd need to work to earn it.
Ariella's blog said…
You're the accountant, right, Ezzie? The challenge is to think of those numbers when the stores try to lure you to buy more and more.

As to Chaim B's comment, it is an axiom of economics that there is a scarcity of resources which compels people to decide how to allocate them most efficiently. If one has no sense of scarcity, there is no push for efficiency. That applies to time, as well, for work expands to fill the time allotted.

But I truly believe that efficiency is a virtue even for those who could afford to be wasteful. Isn't that implicit in ba'al tashchis? You would not need the prohibition if you could never afford to throw anything away; it comes into play for those who feel they have no real need to conserve.
Orthonomics said…
The use of credit takes away some of the notion of scarcity.

Great post!

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