Sunday, January 29, 2017

Marginal utility of Time vs Money

I'm always fascinated by my earlier 'miserly' behaviour, like how I used rusty shavers to save some money or how I worked like crazy to save my first 50k until I get so burnt out. I framed it as a growth mindset, where I grew bigger than my problems, hence it's not that my problems became smaller and therefore manageable, but rather I grew bigger, so the problems no longer affect me that much.

This three articles I blogged about has the same underlying theme:

1. Frugality isn't just about saving money
2. Being frugal with your time
3. Of Dragons and Men

Recently, while reading Tools of Titans by Tim Ferriss (I could not recommend that book enough), I came across another interesting framework to use. It's the idea of the marginal utility of an extra minute vs an extra dollar.

The idea is simple: Imagine you want to go to another place, and you can go by either taking a cab or walking there. Taking a cab is definitely faster but more expensive, so you spend money to save time. On the other hand, walking is slower but cheaper, so it allows you to spend time to save money. By comparing the marginal utility of time vs dollar, you can make a rational decision. If the utility of one extra dollar is more than the utility of one extra minute, save the dollar and spend the time i.e. walk there. If the utility of one extra minute is more than the utility of one extra dollar, save the time and spend the dollar i.e take a cab there.

Here's a few more illustrations:

1. In the past I used to go all the way to Pennisular Plaza to get sports shoes. The reason is that because there are a lot of similar shops there, so the greater competition combined with the great variety makes it a cheaper place to shop. However, the savings is probably not much, perhaps only 10-20% only. So to save that few dollars, I would spend the time to go over there, because I have more time than money, so the utility of that extra dollar is more important to me than the utility of that extra minute, hence I spend my time to save the dollar.

2. Until about 5 years ago, I used to go to my student's place for lessons. These days, I would charge a lesser amount if students come over to my place for lessons instead, because I don't have to spend the extra time travelling. Even though I can earn more if I go over, I normally don't do that anymore. The reason is that the utility of an extra minute is now much more than the utility of an extra dollar, hence I would rather spend money to save time by letting students come over to my place instead of the other way.

But please do not treat this as a mathematical model. At best, it's a philosophical concept. If you want, you can valuate your hourly rate, but I think it will be hard to valuate your time. So agar agar (estimate) will do and there's no need for complex computation to derive whether your marginal utility of time is more or less than that of your money.


Because the marginal utility of your time is more valuable than the marginal utility of doing the computation LOL


Createwealth8888 said...

For retirees; we spent time to save money. :-)

Singapore Man of Leisure said...


Happy Chinese New Year to you!

Its refreshing to re-read your old posts and the comments there.

A good reminder why we in Corporate put such a high premium on "punctuality".

Some would never know that's why they have been passed over for that promotion...

If we are always making penning wise but pound foolish decisions, its hard to be a Titan and grow out of our problems ;)


That's the essence!

Those who are good at time management are frequently also good at whichever fields they are interested in.

It encapsulates:

1) Discipline

2) Ability to say no

3) Know what to prioritise

4) Sense of urgency

5) And so on...

It's a good leading indicator of "success" ;)"

la papillion said...

Hi bro8888,

Haha, of course, because now you have more time than money :) It's funny how you go through one big cycle to go back to our original point. I'm sure in the past you also will spend time to save money, then go through a phase of spending money to save time and now we're back again.

la papillion said...


Happy CNY!

Haha, I remember that comment of yours :) That list of yours is still a very good guide to the few key characteristics of a successful person :) Regarding my post, if I'm still spending time to pinch pennies, I've not grown over the years. These days, I'm more inclined to spend money to save time :)

simplefolk said...

good tool to evaluate if worthwhile to spend more on time or money
i guess it's more relevant to entrepreneurs or those on tight schedules who needs to balance between time & money.

just a different perspective, as ordinary simple folk (who are not trying to be titan), more often that saved time got squandered since our schedules are usually quite lax.

also one may gain more experiences (especially during travels / shopping) when you spend more time (slow travel) than money (fast travel) :)

Kate said...

Nice post! I think it's great that we are comparing the cost of time wasted and money and although we are not comparing apples against apples, it still provide some food for thought.

I think sometimes we could reflect on what we could do with the "supposed wasted time". For instance, if the journey to work is long (takes around an hour for me), many individuals just spend the time watching dramas or playing games in the public transport, although personally I prefer reading :)

If we could compensate with other activities such that "time wasted" is not really seen as wasted, the marginal difference could gradually diminish.