What’s good about money and freedom is how you spend them

Once again I find myself responding to ideas I’ve read but didn’t bookmark because I didn’t know until later that I might be actually writing something that responds to them.  Alas, you’ll have to take my word for it.  And maybe someday I’ll find the posts I’m thinking of or ones like them and add them here.

Anyway, what I’m responding to is the idea that money is freedom.  Specifically, I’ve read blog posts where people wax poetic about how wonderful it will be to be financially independent and cast off all constraints to swim in the boundless ocean of possibility.

Which sounds lovely, of course, but (and I wish I could find one so I could show rather than tell about this) it felt to me like they were misunderstanding the value of both money and freedom.  Because they were thinking only about having them, and the value comes from how you spend them.

This is pretty well understood in the case of money.  On the mild side, hoarding money can be merely overcautious and unimaginative--you put too much of your energy into thinking about negative contingencies and forget to live well and plan for the possibility of things turning out alright.  On the extreme side… well, there are plenty of angles and examples to choose from, each grotesque in its own special way.  But I think most people who have an unhealthy relationship to money would at least acknowledge in the abstract that it’s a means to an end, even if they’ve lost sight of that in practice.  

Freedom, though, people tend to view as an end in itself.  And it probably is, on some level.  But I think on a practical level there’s a pretty good analogy to money.  Hoarding freedom, for example, has its own forms of ugliness--fear of commitment would be a big one, whether to individual relationships or social ties.  Unwillingness to make a choice for fear of foreclosing other alternatives seems to fit as well.  And then there are extreme cases like the anti-government militia people, who are so focused on preserving their freedom that they lock it in a box, build a bunker around it, and never set eyes on it again.

So what’s the alternative?  Spend it.  One example I’ve thought about was inspired by my father-in-law, who retired a couple years ago.  He loves being retired, but has taken on enough regular volunteering that it kind of seems like a part-time job, complete with having to pre-arrange vacation time.  That kind of commitment is different from just helping out.  It costs more in freedom, because he’s allowed people to count on him showing up week after week, and it confers more benefit on the organization.

I should think of examples in between, but the other ones that are coming to mind are the really big ones: marriage, kids, being there for friends and family.  

Is there an analogy to investing as well?  Probably.  It would have to be something that you spend freedom on and end up with more freedom.  Education, perhaps.  And marriage might fit, in some cases and from some angles, at least.  Kids, for me, definitely don’t.  Copious freedom has been laid out (also money) and I don’t expect to see it again.  I feel it’s freedom well spent, though, at least so far.

Perhaps my half-remembered interlocutors would find this reasonable and totally compatible with their outlook, but as I half-remember them, they seemed to be imagining a glorious future of frolicking, Scrooge McDuck style, in their towers full of freedom.  So if I could find any of the posts, I might leave a comment along the lines of “Sounds lovely, but what are you going to actually do with it?”

The Do-It-Yourself Decision Calculus: Cheaper, Better, or Fun

File this under rules of thumb or guidelines that I formulated in my head at some point and refer to occasionally.  This one is probably 5-8 years old.

The rule: it's worth doing something yourself (vs. buying a product or hiring out a task) when it's some compelling combination of cheaper, better, or just plain fun to do.

A particular decision could be made on small contributions from each factor, or it could be based entirely on the strength of one of them, but it has to meet that test somehow.  (If you flip it around, it sounds pretty obvious: if you'd be suffering to do/make something that will cost more and turn out worse, obviously that's something you should buy or do without.)

My primary examples: beer and applesauce.

For example, that's Two Hearted on the right.

Beer

I've been asked before whether I brew beer, because it seems like something I'd be into.  But in fact I've never even really been tempted.  It certainly doesn't sound very fun—a bit of planning and cooking, a lot of waiting, and a lot of tedious sterilizing and processing—and while home-brewed beer is cheaper, my impression is that it's not way cheaper, and at the rate I drink beer (which I guess might increase a bit if I had larger quantities sitting around, but not drastically) it would take a long time to make up for the investment in gear.  But the biggest factor for me in this case is the "better".  There's so much really good beer out there, I just don't see myself managing to make something that would compete.

Applesauce

You can buy applesauce cheaply and you can buy pretty good applesauce (not cheaply), but can you get applesauce that's as good as our home-canned Fuji/Honeycrisp blend?  I'm not sure you can.  And can you get it for about $1.70 per quart?  No, you cannot.  I can't say it's particularly fun (as a small-scale activity with friends or family it might be, but the way we do it these days is I stay up late processing a bushel at a time with a hand-powered Foley mill), but it's totally worth it.

Other cases:

• Knitting: it's not even close on price (decent yarn is expensive, manufactured goods with the same quality materials cost less), and I think in most cases there's no quality advantage.  So this is something you should do if you find it fun (of course the fun can be in wearing or giving away something you made, but it's probably best if you enjoy the activity itself at least somewhat).  I used to, but at some point it stopped being worth it for me.
• Home/car/bike repairs: all about cost.  Though in some cases I think quality benefits, because you have the time and motivation to be as careful and do as good a job as you can, whereas someone else's main goal might be to finish and get paid as fast as possible.  Obviously quality can also suffer if you don't quite have the hang of what you're trying to do (solution: more YouTube videos!).  There can be a fun factor, too, if we stretch the definition of "fun" to include "sense of satisfaction at one's own increased competence and self-reliance."
• Roasting coffee: I would like to get back to doing this.  The cost is roughly even, but I found it enjoyable.  And while there's no shortage of good coffee out there, I think in this case there's something to the claims that extreme freshness makes a noticeable difference.
• Granola, hummus, yogurt: I've been making these three recently (yogurt very recently, and it might not stick, but the other two are part of my routine now).  I do like my versions, but there are plenty of store-bought versions that are excellent.  So this is purely a cost issue.  Not that we're actually saving money, I don't think, but we get to eat more granola and a lot more hummus than we would if we were paying store prices for them.

Super-fancy and overly complicated house cost calculator

This tool originated from a conversation about the idea of buying a new house and living there for five years. My reaction to the idea was mild (or maybe moderate) horror at the enormous transaction cost. It's easy to do the math on that part, but it got me wondering what the actual all-in cost of such a decision would be. Which meant I needed to figure out the all-in cost of buying, owning, and then selling a new house vs. the cost of continuing to own the one we have.

This house looks nice. Maybe I'll buy continue to own it!

So I made a fairly complicated Google spreadsheet to figure it out. (The answer I got was suitably striking: $50,000. But I've since discovered several bugs in that original implementation that caused it to overstate the difference.) Then I wanted to share my beautiful creation, but linking to a Google spreadsheet seemed dumpy. A javascript calculator would be much nicer. Too bad I didn't know javascript. Fast forward a while to when I decided it was time to learn javascript, and I knew just the project to use for practice.

The idea of this calculator is to figure the total cost of owning a house—mortgage interest, property tax, insurance, and, importantly, the opportunity costs of having a bunch of money tied up in home equity.  When I say it includes insurance, what I actually mean is that it lets you enter a fixed amount and/or a fixed percentage of home value to add in, so it doesn't do anything very smart to figure out insurance cost, but it does provide a place to account for it. Also utilities, if you want to try to estimate them. Different houses will definitely result in different utility bills, but it's hard to predict what the actual relationship will be.

The calculator is on a page of its own here. You can go there now, or stick around for what's probably a lot more explanation and comment about the assumptions, parameters, and output values than is really necessary or useful.

Assumptions

Inflation: One of the biggest pitfalls with long-term calculations like this is dealing with inflation. For example, it would be easy to fall into the trap of thinking that you made a nice profit on a house if, say, you bought it for $150k and sold it ten years later for $200k.  Actually, if inflation averaged 3% over that time, your real return would have been -$2,403. Before transaction costs. So it's really important to account for inflation in these types of models. The calculator attempts to provide all values in current dollars. So, for instance, after a while the sum of "Principal paid" and "Remaining principal" won't add up to the purchase price, because both will have been discounted for inflation.

Real opportunity cost, real appreciation rate: This is a continuation of the above, but I wanted to emphasize it. The opportunity cost rate is meant to be a real (i.e. inflation-adjusted) rate. So if you think you can average a nominal 7% return on your investments but that inflation will be 3%, your opportunity cost rate should be 4%. And the appreciation rate should be not how much you think the house's value will grow, but how much it will grow above the rate of inflation. General rule of thumb: it won't. The long-term average behavior of house prices is that they keep up with but don't outpace inflation.

Selling: Since I was focused on a "buy then sell" vs. "do nothing" scenario, I set this up so that it requires a sale date and the overall bottom line is post-transaction-costs. I don't think that's necessarily a bad thing, since transaction costs are ginormous and it's easy to forget about them when doing rough estimation. But if you want to do a run for "keep indefinitely" you can put in a big number for "Years before selling" and set the "Selling cost" to zero.

Tricks

Hiding columns: There is an excess of columns in the output table. If you click on a column header, that column will disappear (and you'll get a button to put it back if you want).  Your choice of what columns to show and hide should be persistent (unless you reject the cookie. Or there's a bug).

Calculating the status quo: To figure out the current and future costs of your current situation, just set the purchase price to what you think the current value of your house is, the down payment percentage to the number that makes "Purchase price" minus "Down payment amount" equal to your current remaining mortgage principal, and the mortgage term to the amount of time left on your mortgage (use decimal years if needed).

Saving your input values: The results page includes a link back to the calculator with the values you chose encoded in the URL, so that they'll override the defaults. I.e. it's suitable for bookmarking or for opening multiple copies of to try different variations.

Input parameters

There's really no point in commenting on all of them, is there? But here are some notes.

Purchase price: Starting off easy.  It's exactly what it sounds like.  Though it's treated as the value of the house, so if there are shenanigans like a "seller assist" involved, it would probably make sense to back those out and adjust the down payment to make the initial mortgage amount match.

Down payment amount: Not editable or used directly, but it updates based on purchase price and down payment percentage to show the actual dollar amount that they imply.

Mortgage rate: The built-in default is 4%, which is in the ballpark for a 30-year fixed loan at the moment. The default is the most recent 30-year fixed rate from Freddie Mac's Primary Mortgage Market Survey (loaded from Quandl. Do people know about Quandl? I just found out about it. It is awesome).

Years before selling: As mentioned above, you can ignore the selling aspect by setting this high and "Selling cost" to zero.

Show every X months: This controls how many rows the output table will have. It's not smart enough to always show the last month if it's not divisible by this number, but fortunately multiples of 12 are very divisible numbers.

Real opportunity cost rate: This should be the average inflation-adjusted return you expect from money you have invested. I.e. if the money tied up in the house were in a retirement or investment account instead, how much would you expect it to earn above inflation. The default, 5%, is on the conservative side of fair for a long-time-horizon diversified portfolio. At least historically. If you think the future is not so bright, adjust this down. But don't succumb to knee-jerk pessimism, either.

Note that this assumes that if the money you have invested in a house were available it would be invested in a diversified portfolio. If you believe yourself to be the sort of person who benefits from the forced savings aspect of having a mortgage, and who wouldn't manage to keep that money invested if it were in a more liquid form, you should adjust your opportunity cost rate down. In the extreme example, I guess if you thought you would spend every penny that didn't go toward the mortgage, you could make the opportunity cost rate zero. Or even negative. I would need to give more thought to whether that would produce sensible results.

Inflation rate: There are a lot of different ways this could go. The average since the mid-80s is something like 2.8%, but since we don't seem like we're that close to getting out from under the Great Recession, I made the default 2.5%. That's leaving aside the secular stagnation hypothesis, which could mean it'll be much lower or could mean—if the idea gains wide acceptance and the Fed acts to counteract it—that it it'll be significantly higher. So yeah, 2.5% seems a decent guess to me.

Buying cost: As I understand it, sellers and buyers usually split transfer taxes. In Philadelphia, those are 4%, so I estimated 1% for mortgage fees, title insurance, etc., and made it default to 3%.

Selling cost: Defaults to 8%. Hopefully it's lower for some people, but in Philadelphia it's probably slightly higher, given the traditional 6% agent commission and the seller's half of the 4% transfer tax.

Real appreciation rate: As noted above, the long term average is for houses to keep up with inflation. Obviously the short-term behavior can deviate a lot from that. But I don't know of a reason to predict something different happening in the future.

Property tax rate: Philly now uses actual value with a homestead exclusion. If your taxes are based on some other calculation, you'll have to do some math. It should be possible to use this and the "Property tax exclusion amount" field to get to the right answer, though.

Property tax exclusion amount: Subtracted off of the current home value before it's multiplied by the property tax rate.

Misc expenses (% of home value): What it sounds like. For each month, it's multiplied by the appreciated home value for that month.

Misc expenses (dollar amount): Unlike most of the amounts in the table, this is assumed to increase with inflation, so will not be discounted by the inflation rate.

Reuse results window?: If this is unchecked, it will pop up a new window every time you hit the button. If checked, it will make a window and then reuse that window for subsequent runs.

Results table columns

Wow, this is getting long. Hopefully people bailed out and followed the link above.  Here it is again if you hung in this far but have had enough.

But for those who are ready to stay with me to the bitter end, because there's something they're procrastinating that they really don't want to go do, I shall press on with a few notes on the output values.

Payment: This is the amount your mortgage company will charge you for principal and interest, based on the amortization calculation. It might seem weird that this amount changes every month for a fixed-rate loan, but that's because the bank is charging you based on the nominal balance of your loan but the table is showing current dollars. Every month the amount you have to pay is actually, adjusted for inflation, a little lower.

Interest: The portion of the month's payment that goes to interest.

Total principal paid, Remaining principal: These move in the direction you would expect, but the total paid grows a little slower than you would expect and the remaining principal shrinks a little faster, again due to inflation.

Current value, Equity: Current value is the purchase price times the compounded real rate of return. Which, by default, is zero, so this column is pretty boring. Equity is that value minus the remaining principal. When you've borrowed money to buy an appreciating asset, inflation makes you slightly richer.

Opportunity cost: This is how much you're losing during the month due to a) the money that's tied up in the house not being invested more productively and b) the money you've spent on interest, taxes, and opportunity cost in prior months being gone instead of being invested and earning money for you.

Monthly bill: Not directly relevant to cost, but since I had the quantities available I figured it would be nice to see the actual monthly cash flow implications. This is your monthly principal and interest payment plus monthly misc expenses and property tax.

Monthly all costs: This is what it actually costs you to own the house for the month. Compared to "Monthly bill" it adds opportunity cost but subtracts the amount that goes to principal.

Totals: Then we have some running totals of the quantities described above. Discounted for inflation, of course.

Sales cost per month: The last few columns are concerned with the effects of selling. This is the total cost to sell the house in the given month divided by the number of months since you bought it.  I.e. if you sold this month, how much would you have paid per month just in transaction costs.

Total appreciation: This is equity minus total principal paid.

Note: My default scenario has home value matching but not beating inflation. So if you're not making money (in real terms) on the house, where is all this appreciation coming from? One possibility is that it's a bug. But I think it's not—I think it works out that way because the amount you actually paid for the house is constantly shrinking due to inflation, but that doesn't have an effect on your monthly costs. You only profit from that difference when you sell. Anyone who can actually explain this so it makes sense (either an understandable way of saying why the calculator is right or an explanation of why it's wrong), please comment.

Final monthly cost: The sum of "Total all costs" and total sales cost minus total appreciation, divided by months of ownership.

Final total cost: The total amount the whole thing cost you, post-sale.

Fin

At last, the end!  If you haven't already, it's time to go to the calculator!

Postscript: The New York Times and I have so much in common

I wrote this post (all but a couple paragraphs) two nights ago, on May 21. The code wasn't quite ready, but I hoped to have everything done and posted in a day or three. Then what should I find in my Facebook feed the next morning? This! A new tool by the New York Times's "The Upshot" blog that's remarkably similar to mine, except for being way nicer looking, more usable, and generally great.

I must admit to having felt some chagrin. It's true that I'm not in competition with the Times. And what we've both done is presented a solution to a particular math problem that affects lots of people's lives, so you can't really consider that creative work that you would expect to be unique. But still, I built this tool because, until yesterday, I hadn't seen anything like it. So it took the wind out of my sails a little to have this thing I've been thinking about since last July (that's when I made the spreadsheet. The javascript part is more recent) so precisely clobbered.

The one revision I've made to my tool based on looking at NYT's is that I had put all the transaction costs on the selling side, not realizing that transfer taxes are usually split and thinking the other fees are small enough to ignore, when in fact they can add up to real money.

I would say the one thing I like better about my tool is that the table lets you see intermediate amounts and makes it a bit easier to see how things add up and fit together. I also think their opportunity cost default is too low (though some might argue that I've gone too far in the other direction), and while it's cool that they try to account for taxes, I suspect they treat all property tax and mortgage interest as deductible against the entered marginal rate, and I think in a lot of cases—maybe more often than not—that would overestimate people's tax savings. And I provide a bookmarkable link. I don't see a way to save your numbers in their tool.

On the other hand... there are too many things to mention. But I will say that the comparison to renting, which is somewhat central to the Time's tool and totally absent from mine, was not a priority for me because I don't feel like I could find a suitable rental in my neighborhood at any price. In New York there's a pretty diverse and comprehensive rental market, but I think in a lot of places, there just aren't good rental options to be weighed against buying.

So that's the story about that. My little tool might be 99% superfluous now, but I like it all the same.

A personal finance spectrum

There was a lunchtime presentation at my work the other day on "Financial Wellness", and one of the things I took from it is that it's really hard to give a presentation like that that's pitched to what your audience needs.  Because there's a good chance the audience will include a range of people in vastly different financial situations, some of whose needs, in terms of advice and education, basically don't overlap at all.

So that got me thinking about what I would do if I wanted to give such a presentation, and I figured I would have to be ready with at least three different presentations, then start off with an (anonymous) poll and deliver the one that was pitched to the majority of the audience.

So here's what the poll might be like.  So as to avoid anything too value-laden, I figured the scale should be something that's not strongly suggestive of a ranking.  Though I might not have succeeded.  This is certainly reminiscent of the old Terrorism Threat Level and the forest fire risk scales.  Not entirely value-neutral.  But actually I kind of like that the red end is suggestive of danger.

• Spending consistently exceeds income. Large and growing debt.
• Spending is sometimes more and never less than income, so debt is either growing or flat.
• Spending sometimes exceeds income and debt expands, but when income ends up higher at least part of it goes to reduce the debt.
• Spending equals income, because it expands to absorb whatever comes in. Financial decisions are based on immediate cash flow and there is no expectation of increasing net worth.
• Spending roughly equals income, but when income is higher much of the difference is kept.
• Income slightly exceeds spending. Able to save, but mostly saves up for things rather than accumulating very much.
• Income consistently exceeds spending. Saves a small amount (e.g. enough 401k to get matching, plus a little in savings).
• Saves 10-15% of net income. Probably on track to retire at Full Retirement Age. Spending is correlated with income, but the coefficient is below 1.
• Saves 10-15% of net income, but spending is not strongly correlated with income, so additional income or reduced expenses will have a significant impact on the bottom line.
• Saves 40% or more of net income. On track to be financially independent before Full Retirement Age.
• Saves 60% or more of net income. On track to either retire soon or end up quite wealthy.

This particular spectrum is very focused on income/expense balance.  I figure that correlates with factors like spending habits, debt use and payment habits, approach to high-impact financial decisions (like how much to spend on housing and transportation), and level of confidence in managing finances and investing, but I'm sure you could put those other factors on the same scale and plenty of people would find they're best described by a range of different hues.

And now... the poll!  Just for fun.  Fully anonymous (I think. I certainly have no idea how I would track clicks back to people. At most an IP might be logged in a database on the server of the free poll creation web site I googled up, where nobody would know or care what it was about).

Where do you fall on the spectrum?
	Infrared
	Deep red
	Bright red
	Red-orange
	Orange
	Yellow
	Green
	Light blue
	Deep blue
	Violet
	Ultraviolet
pollcode.com free polls

Baseline Personal Finance Rule #1 vs. Mental Accounting

Baseline Personal Finance Rule #1, as invented by me on the spot in an earlier post, is:

“Spend no more than you need to on the things you've chosen to acquire or do.”

Rule #2, “Choose wisely what to spend money on, especially when it’s recurring” might seem like it should come first, but Rule #1 gets its spot not necessarily from its relative importance or any conceptual primacy, but from the fact that it’s the one that comes to mind more often.  That is, it’s the one I have to remind myself of more often, and make an effort to apply to my actions.  Rule #2 is certainly important, but I think in practice it’s a little more obvious and a little easier to live with, so it takes up less mental space.

So back to the matter at hand: today I want to talk about one of the ways that I’m always trying to break Rule #1: mental accounting. *

One way of describing what the term means: mentally assigning amounts of money to different categories based on origin or purpose and applying a different utility function to each category.  A simpler way of saying the same thing: if you find yourself telling a story about where a particular chunk of money came from, you’re engaged in mental accounting.  The term comes from behavioral economics (I’m told that it was coined in 1980), but of course the practice has been around forever.  (It’s one of the defining traits of Richard Carstone in Dickens’s Bleak House that every time he avoids spending money on something, he views the amount not spent as a windfall and starts looking for something else to blow it on.)

Now is a good time to be talking about this, because people who waited until the deadline to file taxes are about to see their refunds come in.  Tax refunds are a classic mental accounting scenario—since it comes all at once and from the government (rather than from an employer, where “regular” money comes from), people ask the question “What should we do with...” or even “How should we spend…” their refund, and come up with answers that would never fly if the money were coming out of a savings account.

I’m glad to say that one doesn’t get me.  At least not anymore.  But I do find myself fighting the mental accounting impulse, especially by looking at money that comes from irregular sources or can be construed as a windfall as “cheaper money” that I can justify putting towards things I wouldn’t spend regular, full-value money on.

One that comes up a fair amount is credit card rewards.  Since I returned to playing the sign-up bonus game a couple years ago, I occasionally have $100-$400 coming in from a one-time source, and which I did almost nothing to acquire.  It’s hard not to categorize that as “windfall” and let it go way more easily than I normally would.  Even worse is when it comes in the form of gift cards—there are several stores that I know I’ll eventually spend money at, so I’ll take rewards in the form of gift cards (or occasionally buy discounted gift cards directly) and consider them almost as good as cash.  But it still takes a lot of discipline to not let the “Well, I have a gift card” idea influence my purchasing decisions.

But Rule #1 helps.  Focusing on “spend no more than you need to” recategorizes money into the part that has to be spent to meet the need and the part that doesn’t.  Regardless of where it came from, clearly that second part is money that I should hold on to.


* Note: this is the first in what I hope will be a series, with the next two being “vs. Anchoring” and “vs. Just Plain Laziness”.

Time value of money, money value of time

"Well a rich man counts his time/like a poor man counts his money"

The money value of time comes up a lot in personal finance, such as in the thought "My time is worth $__/hour, so it's not worth it for me to spend hours mowing the lawn/cleaning the house/etc. I'll hire someone to do that." This is a potentially useful heuristic, but I think the obvious formulation of it is way wrong. Leaving aside the question of whether the wage used is adjusted for taxes, the fact is that most people are not in a position to get payed anything at all for the time they would be using to mow the lawn. If you have a salaried job and no side gigs, the marginal value of an hour of your time is $0.

So decisions about whether to spend time or money on a problem or need aren't really about which solution leaves you richer. Spending time always wins. The question is how much it's worth to you to not have to spend that time. One way to answer that question is to put a value on the time you would have to spend based on what you would actually do with it--if you'd be watching TV, probably the number will not be high, but if the cost is time spent with your kids or doing a hobby that you love, it might be quite high. Another way to approach the question is to convert the money back into time, i.e. figure the time value of your money.

I don't recall seeing much discussion of the time value of money in personal finance writing, but it seems to me like a very useful quantity when trying to make good financial decisions. Here's my formula:

(annual increase in net worth) / (workdays/year)

It's very simple, and the quantity it produces is the money value of a day of your life. For example, for someone who saves $12,000 per year (I include debt principal paid as part of savings) and works a regular full-time job with 10 holidays and 10 vacation days, the formula says:

$12,000 / 240 = $50 per day

So a $50 concert ticket costs that person a day of their life.

Note that this is a heuristic for evaluating marginal and discretionary spending. Housing, insurance, and any established spending habits are already built into the savings number. Those are obviously important, but they're not really areas where time and money valuation heuristics come into play. They're subject to baseline personal finance rule #1: Spend no more than you need to on the things you've chosen to spend money on*. As for how to arrive at a number for total annual savings, assuming you're not a Quicken or Mint or other tracking tool user, probably subtracting end-of-year statements makes sense. Or else get decent data for a few months and extrapolate. (I use Quicken, so I can tell you to the dollar.)

Note also that if your net worth is not increasing then you won't get a useful number from this formula. In that case you're either in a state of emergency or you don't expect to ever do better than scrape by**. The calculations for living in financial despair are quite different.

Armed with this quantity, you can go back and evaluate the amounts you want to spend on saving your leisure time. E.g. would you be spending 3 days' worth of money just to save one evening's worth of yard work?

*Baseline personal finance rule #2: Choose wisely what you spend money on, especially when it's recurring.

**Ok, yes, there's also the possibility that you're smoothing your consumption over time because you expect to make much more later. Which makes plenty of sense in some circumstances.