Time is money, they say. But how much is your time is really worth? When deciding what to do with your free time, putting a price tag on it can help to determine what trade-offs you’re actually making.
Find out what your working hours are worth
The traditional way to put a dollar value on your time is to consider how much money you make each year and divide by the number of hours it takes you to make that money. If you want to go into the details of this calculation, James Clear wrote about this for Lifehacker in 2015. He advises you to consider everything the hours you spend earning money, including your time traveling to and from daycare. Then simply divide your income by the total number of hours you counted. (Most people, he says, put in about 2,500 hours a year at a full-time job.)
According to this calculation, if you earn $62,455/year (the median income of men in the United States when he wrote this article), your time is worth $24.98/hour. So you would be wasting your time if you spent an hour trying to earn or save less than $25. And it’s a useful calculation when comparing jobs: if you’re considering a job that pays more than your current job but has a long commute, for example, it might not be worth to change.
But I don’t think that’s the right way to look at your free time. If you spend an hour shopping at a flea market and you save $20 on something you were going to buy anyway, it’s not like you’re throwing away five bucks. You can use your free time as you see fit, and you already have won your free time by working during working hours.
Compare your free time to what you could earn working
Another way to look at this is to ask yourself what you could be doing with your time right now. If you do freelance work, like I did before, any hour could be an hour of work.
In this example, let’s say you have a side business that pays $20/hour. If you had to spend an hour shopping to save $12 on something you need to buy, you might as well pay the extra $12 and spend that hour working instead. You will come out $8 richer than you started.
The problem with this method is that maybe you don’t have want to work all the time. If you have a choice between spending money or spending time doing a chore, say grocery shopping, you might be tempted to pay delivery charges so you can buy yourself an hour with no obligation. It’s not about the work you would like to do during this time, but rather what you would pay for not working at all.
Add surge price
In the end, the value of one hour of actually free time is the one you need to judge, rather than calculate. From my perspective, I only have a limited number of hours in a day that I’m willing to use for work (whether it’s paid work or unpaid work, such as childcare or household chores). If I’m so busy that I only have, say, two hours left, you just can’t pay me enough to give up one of those hours.
In that sense, I think a more logical approach would be to variably assess the hours of your day using a surge model. In the event of a power surge, the more demand there is for something, the more you have to pay for it. In this case, your hours are in high demand by youand any potential gain must be weighed against that.
Here’s what such a model would look like in practice:
- The price of your working hours is your income divided by the total number of hours you spend earning that income (including travel time, etc.)
- The price of a limited number of hours of “free time” is the income you could earn during this period if you wanted to work. This is based on the rate you get from your hustle, which may be a different rate than what you earn at your day job. (Feel free to calculate these hours by the month or week rather than by the day.)
- The price of the remaining hours of free time is set by you, depending on what it would take to get away from your family and hobbies. The sky’s the limit here: if you genuinely turn down $200 to get an extra hour’s sleep on a Saturday morning, that hour’s worth is more than $200.
Using this model, you decide how many hours of “time off” are available at the rate your partner pays, and how many hours are available for surges. If you have a stressful life or a chronic illness, this number may be zero and your time may simply be “unbuyable”. When it comes to money, you spendit may mean you’ll gladly pay an extra $200 to come home early from your vacation so you have time to decompress.
Of course, monetary decisions also depend on how much money you have, not just how much money you want to spend. If you just can’t afford to have your house professionally painted, but you have the next two weekends free, the choice is yours to spend your time painting your house or live with peeling paint. . When you don’t have money, money doesn’t come in.
Life is complicated. Just knowing that money and time are linked doesn’t mean you can always trade one for the other at the rate you want. And speaking from experience as a former freelancer, looking at every hour of your day through the lens of “what could I win now? is a fast track to burnout.
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