Are you by chance someone who is willing to drive a little further and spend a little more time to save money on petrol when you refuel your car? Or are you someone who drives an extra 10 minutes to another shop to save money on the goods you purchase?
Have you ever thought about your willingness to save money at the cost of your own time? I questioned this the other day when I went well out of my way to save a few dollars refuelling at a petrol station at the cost of my convenience. I spent 20 minutes travelling out of the way to save roughly 5 cents a litre on 50 L. This saved me $2.50. Now if I was to calculate this as an average rate of savings it would be $7.50 per hour…. Well shit, that probably wasn’t worth my time.
Fast-forward to the night after I refuelled. I’m watching television and an ad pops up about saving money on insurance. “SAVE UP TO $250 IN 5 MINUTES”. In that moment I was thinking no thanks, I can’t be bothered. If I did indeed save $250 in 5 minutes that would equate to a saving of $3,000 per hour. What the heck was I thinking?
Why is it that people are willing to spend so much time to save so little money? Or in contrast not willing to spend any time to save a lot of money. This is what I call the financial efficiency paradox. This slightly convoluted title refers to the amount of effort we will spend to save money. Through this insight hopefully you will gain more self-awareness as to the most efficient ways you can save money on your path to financial freedom.
I believe the reason comes down to what we are comfortable with and what is habitual. We regularly go to a petrol station and we know exactly how to save money. It is simple, you find a petrol station that sells fuel cheaper and we go there and fill up our vehicle.
Maybe next time you spend 20 minutes to save a couple of bucks at the servo you will think twice about the little more complicated means of saving hundreds of dollars.
Jordan Bentley – BEng(Chem)(Hons)/BMath
The Informed Investor 