Wednesday, October 29, 2008

Reader Question #001 - Household Outsourcing

As I receive questions (or should I say if I continue to receive questions) via email or comments on the posts, I'll do my best to answer them to the best of my ability. I can't say that I'll answer all of them, but I'll definitely try to get to especially interesting ones. If the question is asked in the comment section, it'll probably be answered in the following comments. If I think it warrants its own post, that's what it'll get!

Anonymous writes:
"I am glad to see that YFNN is back to blogging. I especially enjoy your consumer tips, whether they are about kitchen equipment or how to put together a decent budget. Could you write something about hiring out jobs (like carpet cleaning, window washing, and installing appliances)as opposed to doing it yourself? Where's the tipping point?"

There are quite a few jobs that my wife and I outsource, so to speak. Carpet cleaning and appliance installation are some good examples. We determine whether or not those household jobs should be outsourced by evaluating the total cost of doing it ourselves vs. the total cost of outsourcing. What you've got to keep in mind is that your cost of doing something is not limited to the dollars that leave your bank account. It's also the time you spend doing the job. It's the cost of the equipment needed to do the job correctly. It's the cost of the education required to do the job right. Finally, it's your mental health or opportunity cost - I like to call this the "hassle cost". All of those costs need to be considered before a prudent decision can be made.

Here are some examples:

Changing oil in the cars, motorcycles, and lawnmower.
  • Task cost - If I do the job myself, it costs about $10 in oil, a filter, and rags.
  • Equipment Cost - I've already got the wrenches, drain pan, and funnel to do the job right, so my equipment cost is $0.
  • Education Cost - $0 and zero time. Thanks to lots of experience, I've got the know-how to do things properly.
  • Time Cost - It takes me about 20-30 minutes to change the oil in one of the cars if I move at a relatively relaxed pace.
  • Hassle Cost - Low. I enjoy working in the garage and getting my hands dirty. At this point in time, the opportunity or desire to do something else is relatively low, since I have adequate time with my wife, my work, and my family already. 20 to 30 minutes in lost opportunity time isn't very critical right now.

So, my total personal cost for changing my own oil is about $10, 30 minutes, and low on the hassle cost. With the price of an out-sourced oil change up around $30 or more and close to the same amount of time, it's worth it to me to do it myself. When our child is born however, my hassle cost may increase, since I may prefer to spend that time with our family. At that point, I'll have to re-evaluate the total cost and make another decision.

Here’s another example:

Washing and ironing my dress shirts.
  • Task cost - A few pennies per shirt for the cost of water, laundry detergent, starch, and electricity to run the washer, dryer, and iron.
  • Equipment Cost - $0. We've already got a washer, dryer and iron.
  • Education Cost - $0 and zero time. I feel that I know how to launder and press my shirts adequately. No books, videos, or training is required.
  • Time Cost - I'm a slow iron-er (ironer? ironworker?). Even so, it probably takes about 10 total minutes to wash/dry/iron a shirt – 6 minutes in the washer/dryer and 4 minutes ironing (obviously, the per piece time is low when you wash a dozen shirts at once).
  • Hassle Cost - This is where my cost is high. I dislike laundry and hate ironing. Hate, hate, hate ironing. I feel like it takes forever and it never looks quite as good as from the cleaners. There are also a ton of other things I'd rather do with that time, like scrubbing toilets and reading tax law.

This means that my total personal cost for washing and ironing my own shirts is about three cents, 10 minutes, and ridiculously high on the hassle cost. The cost for me to have my shirts taken care of at the cleaners is about $1-2 per shirt. From a strictly dollars-and-cents point of view, I'm a fool not to do my own shirts; it costs 30-50 times more to take them to the cleaners! But, once everything else is factored in, that $5 to $10 a week is VERY well-spent at the cleaners for me.

Obviously, each individual person's cost for a particular task is going to vary widely. The important thing to keep in mind is that your cost is not just your out-of-pocket dollar cost. The all-important hassle costs will vary greatly from person to person, as will equipment and education costs. All need to be weighed carefully before you can make a sound decision about outsourcing a job.

What are some of the tasks you outsource and why?


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