Question regarding Outsourcing Life math

[Ender]

On page 121 of T4WW, Tim says that it's okay if you pay your 'virtual assistant' $30/hr when you only make $25/hr, because the difference ($40/wk) is worth it because your assistant saves you the equivalent of a days work. Thus, the $40 loss is worth it, because who wouldn't want to pay $40 to get a day off

Now, correct me if I am wrong, but you are not paying $40 a week to get a day off. You are paying $40 on top of making zero dollars, because you have to pay your assistant. So, the equation thus becomes:

a) $50,000 for a five day week, or b) -$40 for a four day week. Doesn't make any sense at all.

Can someone clear this up for me? Am I missing something

Thanks!

[Bradinator]

Yes, you are correct. The math in the book doesn't add up here.

Total made in a week without VA: 40*25=1000

With VA: 40*25=1000- (8*30)=760

So there is a $240 difference. Which adds up to $12,000 dollars less per year.

[kamakiri]

Yes, you are missing the trees for the forest here. The next sentence there is "Keep in mind that this is a worst-case cost scenario." And at the paragraph starts with, "Even of the cost is occasionally more per hour than you currently earn, the trade off is often worth it." (Emphasis on occasionally is mine).

The main point of the paragraph is to get into outsourcing, and take the hits that crop up from time to time. If it costs you more to outsource than to do it yourself from time to time, you are still far ahead of where you would be had you not outsourced in the first place.

Also, your math is wrong. You are paying a VA to do your work for you. You still make the $25 an hour ($50,000/year).

1 Week: $25/hour x 50 hours = $1250 pay for the week

Work 5 days: $1250
Work 4 days: $1010 ($1250 - ($30/hour x 8 hours)

If you can't think of it any other way, then just look at the extra outlay as a cost of doing business.

@Brad - The example uses 50 hour work weeks for you and 8 hours a day for your VA.

[Bradinator]

@kamakiri

You are right that it is about starting to outsource and not the cost of it. But you're math is wrong. Re-read it, because no where does it suggest 50hrs per week. "lets assume you make 50,000 per year and thus $25 per hour (working 9-5, Monday through friday, for 50 weeks per year)"

It still seems a little deceptive for Tim to say the cost to not work friday is only $40.

The true cost is $240, because that is how much less your net income will be.

[kamakiri]

Yes you are right there about the 50 hours. I have had that number in my head for a while, don't know where it came from. About the rest though, that isn't what Tim is saying at all. The $40 comes from and hour for hour exchange. Do you really think Tim is a proponent of paying some one $40 an hour for 40 hours to get one Friday off?

Not at all. The whole concept is based around trading out your time for free time and cheaper outsourcing, and each example is an hour for hour trade off. The true cost is still $40. You work 4 days, and pay a VA for 8 hours of work, taking that time off.

[craftsy21]

kamakiri is right I believe -

The assistant is still bringing in the 25/hr for Tim, so he's only giving up 5 dollars an hour (for 8 hours, to equal 40 bucks) to take the day off.

He doesn't stop making 25/hour, that's why he's paying somebody else to begin with.

At least, that's how I understood.

[Bradinator]

Its a matter of how you look at it. Yes he is still bringing in the 25/hr, but he is paying out 30/hr. So he is losing all the 25/hr plus the 5/hr for friday. It might be worth it occasionally, but giving up 24% of your income to reduce your work 20% will start to add up if you do it frequently.

There are 2 ways to looks at it:

1.If you consider the total loss to income, then the true cost is $240.

2. If you just consider what it will cost for you to just work and be paid for 32 hours while still completing the total work, then the true cost is $40.

Number 1 is the way to look at it from a purely economical standpoint. It is the way I currently see it. (I'll blame it on having too many business and economics classes in the past few years)

Number 2 may be the way to approach it in the NR lifestyle. I would assume that as a NR, it is still important to consider the economics and as was quoted earlier Tim only suggests it would be ok to pay more per hr occasionally.