In this article, I will share an interesting story of a couple saving 2 dollars on tomatoes and we will figure out what is the opportunity cost of saving these 2 dollars.
I recently met a couple (both working) who said that they are very time-poor. Due to not having time, neither they have time to teach their kids (so that the kids can study for selective schools or other good schools or prepare for high school tests) nor do they have time to invest in investments or retirement planning.
I asked them how they spend their time on weekends. They replied on Saturday, they go to Flemington or Parklea markets and buy cheap tomatoes (saving a hefty 2 AUD) and buy other cheaper vegetables. On Sunday, they do cooking, wash clothes, vacuum, mop, garden, mowing, and do other household chores.
That made me think about the opportunity cost of saving 2 dollars on cheap tomatoes. Let’s try to explore this further.
Let’s say one spends Saturday finding cheaper tomatoes and vegetables in Flemington market and overall save 10 AUD on the activity. Considering tolls, petrol, time, and buying bulk stuff that one may not consume and may have to throw away in the end. Let’s say still you can save 10 AUD per week by spending a whole Saturday on it in comparison to buying what you want from a local shop. Savings are 520 AUD per year.
Let’s calculate savings on Sunday. Money saved on the following: –
Gardening and mowing (Outsourcing it once a month cost is 50 AUD) – hence one saves 600 AUD per year.
Vacuum and mopping (Outsourcing it once a fortnight regularly is 50 AUD) – hence one saves 1200 AUD per year.
Cooking (outsourcing part of this job and buying homemade curries in bulk costs roughly 50 dollars per week) – hence one saves 2600 AUD per year.
Yearly savings on spending the weekend = 520 + 600 + 1200 + 2600 = 5000 per year.
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What are the opportunity costs:
- Not having any time to sort out how to save money on taxes – Considering average income to be 100K, tax for each person = 30K. Hence opportunity costs are around 60K for a couple.
- Not having any time to talk about how they will invest their income – property, shares, etc.
- Not having any time to think about their retirement planning.
- Not having any time to sort out their insurance – life insurance (what if they die), disability insurance (what if they become disabled), trauma insurance (what if they are diagnosed with cancer), income protection insurance (what if they are not able to work full time in their occupation).
- Not having any time to sort out their superannuation account – making the superannuation companies richer and richer.
- Not having any time to sort out what to do with their superannuation investments.
- Not having any time to teach the kids and prepare them for competitive tests – selective tests, opportunity tests, HSC, and Uni assignments. Going to private high school because of not clearing selective high school will cost a family around 10K to 50K per year (Total of 60K to 300K from year 7 to 12).
- Not having any time to spend time with kids and family – because all the time is spent on carrying baskets of cheaper tomatoes.
- Not having any time to spend on teaching kids life lessons which will be important for the future of the kids.
- Not having any time to spend on health and fitness. Hence always complaining about why they can never lose weight or become fit.
- Slogging through and dependent on their day job for everything – what if the company restructures and lays you off?
- Not having any time to upgrade the skills so that one can find a better job or get promoted.
- Want to become a manager but look like the old fat grandfather in the team?
- Some of the above activities can be quantified, but some can’t be quantified in monetary terms.
Hence the next time you decide to save 2 dollars on cheaper tomatoes, pls consider the real opportunity cost of that activity. Instead consider parts of the chores which can be safely and practically outsourced to someone else.
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Disclaimer: Articles in this blog are just the author’s or authors’ personal opinions.
It may or may not be correct. Please do your own due diligence and seek professional advice according to your own personal circumstances. The author or authors cannot be held responsible/liable for any content in this blog.
*all images are for illustration purposes only
