I have been having many thoughts and conversations in the past few weeks that has me very intrigued with the “REAL COST” of saving money.  Now I am sure that it applies to resources in general but in my experience time and again people operate from a flawed accounting process that really does not work.

I am not sure if it is the recession, the media or what it is precisely but I have been a party to or have overheard a variety of conversations about “saving money, the environment, resources” that from my perspective just don’t make much sense.  Please hear that I am pro taking care of the environment, I am not a big consumer and I advocate people saving money.  My issue is that OFTEN what people purport to be “saving” really are not, they are engaged in false economies that are created by flawed accounting.

The first one I kind of had to smile about, a friend of mine commented that she would NEVER drive a Porsche because of the damage to the environment. Which that statement does not even make sense if she was aware of the technology that goes into a Porsche.  The new 911 has performed better than 42 miles per gallon!  Regardless this person with huge environmental concerns lives on an acreage that requires a 90 plus minute commute a day.  Which of our vehicle choices and annual mileage/gas consumption does more environmental damage??  I would wager it is not me.

This might seem like a goofy example yet it illustrates that there are ALWAYS hidden and additional costs, and information (like 90 minutes of driving vs 30 seconds of walking) that we must do our best to discover and account for BEFORE making a decision or judgement.

Another example I also have a tenant that is in the middle of (what feels like) the worlds longest renovation process.  He is quite proud of the money that he and his team are saving by doing most of it themselves… now if one just considers the additional 3 months rent, the time invested by smart people with significant earning abilities, the lost income of not having the business open for 3 months, the savings begin to look and feel a whole lot more like COSTS.

Now I want to be clear, I have been there trying to save a buck on a project and “do it myself” but in the end in every circumstance it ended up costing more in replicated work, lost time and the opportunity cost of not focusing on the highest and best use of MY TIME.

So the next time you are tempted to cut a corner or to do it yourself (when you have never done it before) or hire someone less qualified because they are cheaper.  Please do yourself, your family and your business a favour and answer the following questions.

1. What is the value of my highest and best use of my time?

2. Who else could take care of this at a cost less than the highest and best use of my time?

3. What is the short term cost and the long term cost? (Cars can be a great example of this: buying a cheap car because of the monthly payments without considering the depreciation often trades short term savings for long term cost. A more expensive car that depreciates less  or slightly used and already depreciated can actually cost less to drive than a new econobox.)

4. Is there a longer term value to the investment/cost that should be considered positive or negative?

5. What is convenience worth?

6. And one of my favourites “how can I earn more to create what I desire?”  This questions has a dramatically different effect on our consciousness and context than “how can I scrimp, save, work more or try harder to fit my desired lifestyle into my existing income.

Ok there I have vented… the point to all of this is that you cannot cost cut your way to wealth and freedom, it causes you to focus on the wrong part of creation, it forces you to think smaller instead of bigger.

The solution to this recession for you and for me is, how can I contribute MORE value? How can I create more income? How can I make a bigger difference? Thinking about creating will always get you further than thinking about limiting.