Trading time for money

According to conventional wisdom, if you earn 31€/hour, and a task costs less than that to outsource, then you should always pay someone else to do it. For example, if your cleaning person charges 15€/hour, you save 16€ for every hour you spend at work instead of cleaning your house.

I’ve encountered this advice quite often, particularly among the wealthier, productivity porn-loving, 4-Hour Work Week-thumping entrepreneur crowd.

I don’t think that advice is quite right.

Your time is worth less than you think

There is a hefty tax on converting time to money. In Germany, if you earned the average income (42 421€ per year)¹, you’d lose roughly a quarter of it to income tax². Your 31€/hour salary³ is actually worth 24€/hour after taxes.

But there is more to account for: health insurance (7.3%)⁴, unemployment insurance (1.25%), public pension (9.3%) and nursing care insurance (1.775%)⁵ are also deducted from your salary. When it’s all said and done, you take home about 20€/hour. If you also pay church tax and get the most expensive health insurance, you keep 19€/hour.

So again, if you earn the average 31€/hour, and work the average 1386 hours per year, you save about 4€ per hour - not 16€ - by hiring a cleaning person who charges half your rate.

Taxes aren’t the only thing that whittle away your disposable income. You also have some unavoidable expenses, namely rent, groceries and utilities. That’s 550€, 150€ and 100€ per month for a single, thrifty Berliner. That’s 35% of your take-home salary, so you’re left with 12.50€/hour in disposable income. At this point, I’m including decimals, because they start to matter.

In other words, you must sell 72 minutes of your life to buy 60 minutes of your cleaning person’s life, even though you earn twice as much.

Here’s a recap for the mathematically inclined:

hourly_disposable income = (
    (gross_income - income_tax)
    - health_insurance
    - unemployment_insurance
    - pension_insurance
    - nursing_care_insurance
    - (rent + groceries + utilities) * 12
) / hours_worked_per_year

Keep in mind that this describes the reality in Germany, where people work much less, but pay higher taxes. You will get wildly different results in your own country.

Outsourcing costs more than you think

Eating out is often used as an example of trading money for time. It’s faster than cooking your own food: no shopping, no cooking, no cleaning.

In Berlin, you can get a square meal for 10€⁶. A croissant, a coffee and two square meals would set you back 20€ a day. By comparison, my grocery bill is 5€ a day. That’s a 450€/month difference, or 37.5 hours of your time (see above), but you’d probably spend that much time between the supermarket and the kitchen anyway.

However, getting to the restaurant, ordering, waiting for your food, then waiting for the bill takes time too. Personally, I find cooking every other day more convenient than eating out twice a day. Eating out only makes sense when I’m too tired to cook.

This also applies to hiring professionals. You still need time to find one and to work with their schedule. I can change the oil or the brakes on my motorcycle in about 30 minutes. It takes me about as long to drop my bike off at the dealership, but I have to do it during office hours, and wait a few days to get it back.

In short, outsourcing your work does not always make life easier. It can lighten your mental load, but so does working less by having lower expenses.

Time is not a liquid asset

In practice, you don’t get to choose how much of your time you sell. If your expenses are covered, you just can’t stop going to work. If you need more money, you could work more, but rarely on your own terms, just when you need to. You couldn’t sell an extra 2 hours of programming on a Thursday night, because you have nothing else going on. There’s also a limit on how much time you can sustainably sell, regardless of demand - about 60 hours a week.

You can’t choose which time you sell either. Most employers will only buy your office hours. You can’t decide to work night shifts, or to work 80 hour weeks in the winter, then take the summer off. You can’t even decide where to allocate the time you didn’t sell. Your employer usually decides when you take your lunch breaks, and when you can use your holidays. If you’re on call, even your free time isn’t quite yours.

In other words, you don’t really trade more time at the office for less time cleaning your house. You’re stuck at the office for 40 hours a week regardless, so you’re just using some of your fixed budget. However, if you don’t hire a cleaning person, and you don’t spend your money, then you can buy some of your time back later, either as a gap year, or as an early retirement.

As a freelancer, you have much more control over what time you sell, and in which amount. Nonetheless, you are still bound to standard contract lengths, to the limits of your body, and to cyclical demand in your industry. A freelance accountant likely won’t take time off during tax season. A freelance developer will mostly find 3 to 6 month contracts.

Put shortly, time is not a liquid asset. You can’t easily sell more or less of it according to your needs.

Time does not have a fixed value

Let’s pretend that your boss lets you work for as long as you need, whenever you need to. You could spend an extra hour at the office, and pay someone to save you an hour of cleaning.

I’d make that deal. Swearing at my computer brings me joy, but doing the dishes doesn’t. I’d gladly trade a few hours of programming for a few hours of cleaning.

After 30 hours a week, I’d start to value my time at the office a bit more. I’d rather spend that time at home, sipping a beer on my balcony with a pie in the oven, so I wouldn’t be so keen to sell it.

After 50 hours, I’d be selling my time at a much higher price. There’s a point where work takes a toll on your body, and seeps into other aspects of your life. By then, menial work feels like a release, rather than a chore.

Unless you really like your job, there comes a point where you’d rather do something else, even if has a lower market value than your profession.

The hidden benefits of doing it yourself

The most understated benefit of doing things yourself is the skills and the tools you acquire along the way. Your cooking gets better and more diversified with every meal you cook. Bike repairs get cheaper and easier with every attempt. Those skills stay with you, and over time, the benefits compound. You can tackle bigger and bigger projects, and the results look better and better.

Outsourcing, on the other hand, doesn’t get better and cheaper. It either gets better and more expensive, or cheaper and worse. This ties your quality of life to a single variable: your income. Your lifestyle is much more reliant on your ability to stay employed, because it’s the only thing you can do.

Beyond that, doing things yourself is immensely rewarding. Wrenching on your own motorcycle feels good. Delighting your guests with a home-cooked meal feels good. Using shelves you built yourself feels good. These are direct products of your hard work, and symbols of the control you have over your environment.

I’d also argue that it gives you a greater appreciation for the world you live in. It allows you to see things beyond the surface. Musicians appreciate music on a different level, and the same can be said for gardeners, machinists, architects and every other kind of enthusiast. My fledgling interest in gardening quite literally made me see the forest for the trees.

Paying someone else to do it robs you of this joy. Climbing through the career ladder provides its own rewards, but those always felt too abstract to me. If I indirectly make my company a little leaner, I get 4% more disposable income. Big whoop.

Caveats

Some tasks don’t develop useful skills. They don’t get easier, cheaper or more enjoyable with time. Chores are chores, and some work is just plain tedious. No matter how good I get at painting walls, I still hate it with a passion. My father fixed cars his entire life, and he won’t change his oil in the winter, when the car is caked in slush.

Life is short, and the 40 hour work week isn’t going anywhere, so it’s okay to spare your free time for things you enjoy. That’s worth paying a premium for.

Even if you enjoy doing something, the timing isn’t always right. I found that my motorcycle’s front rim was bent just before leaving for a 3 month trip. I already had a lot on my plate with work and trip preparations, so I paid a mechanic to do it. Outsourcing lets you solve multiple problems in parallel.

In some cases, the upfront cost of doing things yourself is just too high. I won’t resurface my motorcycle’s cylinder head at home, because the tools cost more than my net worth, and highly trained machinists will do it for 100€. Sometimes, it’s better to let economies of scale do their thing.

In other cases, the running costs are too high. All those things you maintain will chip away at your free time. In aggregate, they can swallow your evenings. For example, think twice about running your own server to save a few euros per month. These needy buggers tend to require your attention at the most inopportune times. Outsourcing means someone else is taking care of it, and invoicing you once a month.

Sometimes, the risk isn’t worth the potential savings. It’s important to learn how to do things yourself, but don’t bite off more than you can chew. Don’t cause hundreds of euros worth of damage to save a few euros. Hire a professional, and let them do their job. If they cock up, they are liable to fix the mess, not you.

Conclusion

Yes, outsourcing has its time and place, but it’s more expensive than it appears. Sometimes, it’s better to do things yourself, and acquire useful skills along the way. It might leave you with a self-esteem boost, and a greater appreciation for quality work.