How Much Is Your Time Worth?
Time is money.
Right?
A lot of personal finance and productivity bloggers are proponents of quantifying time by some formula related to your income, and judging the value of tasks or frugal choices by comparing them to this number. Trent at The Simple Dollar, who is a huge proponent of this system, explains the formula he uses here:
Let’s say that you can make $12 an hour sitting on your back porch writing, but your lawn needs mowed. If you can pay the neighbor kid $10 to mow your yard, then it’s worth it – you actually earn $2 by sitting on your porch writing while the neighbor kid mows the yard. But if your time is worth only $8 an hour, then you’re better off mowing it yourself. Once I figured out my true wage, I started thinking of a lot of things in this light.
As his commenters point out, it’s not a perfect formula–most people aren’t spending every waking hour doing something that earns money, and if you traded an hour of television or sleep for mowing the lawn you’d both earn the full $12 and save the full $10. (Hey, if you traded knitting you’d even save the price of yarn.) I don’t think it’s meant to imply that, though–it’s an interesting way to look at and think about the choices you make in trading money or time for the other.
Mighty Bargain Hunter analyzes a few different formulas for calculating the value of your time based on your salary that try to account for free time in different ways. One divides salary by all available working hours, another divides salary by hours worked, and a third quantifies free time as worth 2.5x work time. (A fourth refuses to quantify time for philosophical reasons.)
All of these formulas, though, tie the value of your time to your income in one way or another. For another perspective, I’d like to throw out some wisdom one of my English professors once gave to a creative writing class: you can have time or you can have money, but unless you’re very lucky you probably won’t have both. (I also suppose that many very unlucky people who struggle in serious poverty have neither.) However, most people, either consciously or unconsciously, value one or the other.
He was referring specifically to choosing to teach to have the summers off for writing. Generally, higher income professions require a greater investment of time, for education and hours in the office, and consequently force you to spend more money on outsourcing chores and childcare to get your “free time.”
I notice that I have a lot of satisfaction in a job that pays pretty low, for the field and for the geographical area and for what I expected to make, because it almost never requires me to work late or through lunch, and I have time and emotional energy to devote to blogging and freelance writing projects. While those activities might make me small amounts of money (well… hypothetically) or lead to a career, I devote my time to unpaid writing for love.
My life reflects that I value time over money–which is true. That isn’t to say it’s right–plenty of kind, sensible, loving people value a profession that requires an investment of their time and energy and rewards them with a high income. I imagine it helps you feel like you’re doing something very worthwhile with the time you give to your job, because of the required investment as much as the financial payoff. Or something–I hope so anyway, because otherwise who would ever go to medical school?
The impulse to apply a monetary value to your time can come from either prediliction. The exercise here is to the explore the impulse more than to come up with the correct equation. My professor’s point was to warn us that we were probably going to make a choice between time and money, and that it would be better to do so consciously than let circumstances make the choice for us.
So, do you think you made that choice in your life? Is there a way to quantify the value of your time?
You can’t always factor in the money to tasks.
I love to craft, specifically to embroider and make quilts or make doll clothes. I can hear peoples brains spinning into gear about how I could “make money” selling my wares- but thats a huge time commitment I don’t have. It would also mean having to gear up production- not necessarily making what I want as the creative muse strikes me. This is my creative outlet- my time for being my best me (if that makes any sense)- and it doesn’t need to be sold as a commodity. I do use what I make as gifts- so gift giving is way less expensive and some money is saved in this manner- but you can’t really put a dollar amount on my time and personalization of the items given.
It really depends on how much time you have…if your time is worth $12 an hour, but you have another slot of time where you’re earning $0 per hour, you’d probably do better to mow your grass in the $0 per hour slot!
Melissa: Great post! I agree with your professor, “You can have time or you can have money, but unless you’re very lucky you probably won’t have both.”
Time is easier to “find” than money. So for me personally, I picked a profession that offered money. I can make time. Money is harder to make.
I’ve seen a lot of these types of formulas and ways people try to quantify things like “job satisfaction” or whatever, but I feel that the work people do — no matter what type of work it is — is interwoven with life so much that it’s very difficult to quantify. For instance, according to many formulas, if your job pay is low and is not satisfying work, then you should probably get another job. But what if that job is giving you great job skills that you could apply later in your professional career? What if your job moves you to an area that allows your child to go to a better public school? How about friends you have made at a new job, or a positive (ie queer-friendly) work environment, where you’re not worried about your job if you bring your partner to the company holiday party? Likewise, you could turn all these ideas in the opposite direction as reasons not to stay with a job. Making a formula that encompasses all these types of things would be impossible. But at the same time, I think it can be a good wake-up call to people whose post-expenses take-home pay is $2 per hour. You just have to know if all the benefits outweigh all the drawbacks.
I agree, it’s a fascinating way to think about things. I’ve applied that thinking to a number of tasks (often related to buying food vs making it myself because I hate to cook), but I’ve not gone so far as to figure out a dollar amount.
And there’s that peace of mind factor. I might not save myself money by dropping $15 on dinner, but if it’s not breaking the bank or seriously interfering with my goals, I’ll find a lot of value in just not having to worry about it.