Updated: May 3
From time to time I dedicate a little of my professional focus on my own financial plan, and make sure I am practicing the behavior I endorse to reach my financial goals. While working on the task of cash flow/budget planning, I was reviewing my spending on items which my family may not putting to good use. Discussions were had regarding whether we should drop this activity, do less of that activity, change from this plan to that plan, all in an effort to not spend frivolously.
While reviewing my spending, I came upon the annual fee for our Southwest Visa card. Noticing the charge was the impetus for my thinking about whether this card was best for our family. The question wasn’t whether the airline miles had value or if the annual fee was worth the rewards. We put our miles to good use, and I haven’t regretted having to pay the annual fee. But I found myself considering whether this was the best rewards plan for our situation.
I spent some time researching other cards, how their rewards stacked up, how our current lifestyle would benefit from this rewards program versus that reward program. I got deep into the analytics of the value of a dollar spent from one rewards program to the next. After putting in all that time I came to the unfortunate conclusion that not only did I not find a better alternative, but I had broken an important rule of financial planning and most aspects of life; ‘your most valuable asset is your time’. I had gotten too deep into the weeds trying to solve a problem that was not really a problem. Yes, I’m sure I could have found a credit card with a reward program mathematically more beneficial to my family. But would the time put into the task be worth the savings? And what if there turned out to be no benefit to switching cards, and the result was a lot of time wasted?
Moreover, how many aspects in our life can we spend hours on trying to shave off a dime here, and a nickel there? Changes in cable packages, grocery lists, which gas station to use, cutting coupons, etc. etc. Too often, I hear people fret about whether they got the best deal on something or, conversely, bragging about saving money on home or auto fixes by doing it themselves. I don’t mean to devalue the efforts of people who find joy in do it yourself projects or find a cathartic value in ‘getting the best deal’. I am speaking to those among us who feel that they must put in the hours of effort to fine tune their spending and make their cash flow as efficient as possible. In doing this, they forfeit other activities that may have more financial benefit. To those people I ask, ‘What is your time worth?’. For this exercise it is important to ‘know thyself’. I’m not suggesting you shouldn’t track your spending to make sure you're not frivolously buying items you know you don’t need. Do you really need to be a member of that many wine clubs? Do you need to upgrade your auto purchase to include the features you are certain you won’t use, but sound fancy? It is also important to accept whether you are the type of person who would use extra time wisely. If you believe that you are, it is always in your best interest to spend money that will free up time to invest in yourself.
Instead of spending too much time trying to save a dime, a much wiser long-term approach is to instead focus your attention on making an extra dollar. There is much greater value to time spent looking at your earnings potential and ways to increase your salary. Consider continuing education options, career programs through your employer, or more drastic options like career changes or location changes to areas with better opportunities.
If salary advancement is less of an option or need, consider time spent on personal development or life experiences. Paying for certain services can free up time for you to spend with friends, or family, or catching up on your favorite book series. Financial goals should focus on self-satisfaction and life fulfillment, not a perfected bottom line.
And remember, everyone is different. Some people still need to spend time cutting costs to put themselves in a better position, while others need to focus time on building a more powerful income stream and savings ability. But in your efforts to improve your financial standing you must always ask yourself, ‘is this worth my time?’. If someone was paying you to find a better rewards program, or paint your house, or move your furniture, would you accept an hourly wage equal to the cost of hiring someone else divided by the numbers of hours it would take you to complete the task? If the answer is no, don’t think twice about a decision to leave money on the table to move on to the next activity. You likely will never regret losing a few cents if it means capitalizing on life opportunities.