Tuesday, August 5, 2008
Posted by Kate at 6:33 AM
Not long ago, we got our quarterly garbage bill from the township. It was just slightly higher than normal because of a mystifying charge of $2.81 in addition to the regular quarterly amount. I called to find out what it was. They'd charged me a late fee for paying late last quarter.
I happened to know that my last payment was delivered on time, because I pay it in person. To save the cost of a stamp, I simply bring the bill into the township office with a check for the exact amount. The office is located right next to the local library, which I visit weekly anyway. So I was in a pretty strong position to argue my case. As it turned out, I didn't need to argue at all, because the woman who answered the phone admitted that she couldn't see any reason why I was charged the late fee. She removed it without any fuss.
In previous years, I would have looked at that unexplained charge and wondered what it was, felt slightly annoyed about it, and would have felt that I should call and find out what was up with that. But then I would have procrastinated about it, and eventually I would have given up all intention of calling because the dollar amount was so low. With a shrug, I would have just written a check to cover the extra amount and told myself something along the lines of, "It's not worth the time to fight through layers of bureaucracy to get the charge removed. My time is more valuable than that." But in fact, my time has never been worth that much in terms of a paid wage.
As it turned out, the call took about three minutes and didn't involve a frustrating phone maze, poorly trained and indifferent employees, or the runaround. I just saved us $2.81 in three minutes of my time. That works out to $56.20 per hour. Actually, the equivalent of $56.20/hour after taxes. At our tax bracket, I would need a pre-tax hourly wage of $78 to match what I just saved with a three-minute phone call. I don't know about you, but I've never had a job that paid me $78 per hour.
So yeah, it's a small amount. Maybe even a trivial amount to some people. For me, that's another $2.81 that I don't have to divert from our extra principle payment for our mortgage this month. Granted, I can't repeat this to save us $78 worth of income hour after hour. It's still a good example of how doing the math can give you a different way to look at frugality. If someone offered you a low effort, perfectly legal way to earn $78/hour from the comfort of your own home, you'd probably do it, right? But how many of us would just pay the extra late fee because it's too much hassle to pursue an explanation for $2.81? Three years ago, I probably would have. Not today though.
Just to add another layer of perspective to this trivial amount, let's look at what that money could do. If I added just that small amount to my monthly mortgage payment, I'd save a whopping $910 in interest and reduce the term of my 30-year mortgage by a full 6 years. That seems incredible to me, even when I run the numbers. But that's the virtue of tiny amounts of extra money applied to principle early in the term of the mortgage. Less than three extra dollars per month would get me out of debt six years faster. Hard to believe isn't it?
We have an ambitious goal to repay our mortgage at a much faster rate than that even. But I crunch these numbers and present them here to illustrate the power of small sums. If you have a mortgage and you're reading this, you can probably scrounge up an extra $3 per month. Provided you start early in the term of your mortgage, even tiny amounts such as this can make a huge difference. Once again: have faith in the little things. They really do add up.