There are a number of different ways to value your time in order to determine whether to go the extra mile for a discount, do something yourself or hire out, or take on an extra job. I gave my take on how to calculate the hourly value of my time, which turned out to be pretty cheap. A summary of the ideas there:
- Mine: Gross annual income divided by 4000 = rate per hour. The 4000 comes from 50 weeks a year and 80 hours per week of workable time. My reasoning was that just because you only work 40 (or 50 or 60) hours per week doesn't mean that you can value the rest of your time at that hourly rate. It should be valued at $0/hour unless you're earning money.
- Jim's: Gross annual income divided by 2000 = rate per hour. Jim over at Blueprint for Financial Prosperity took this estimate of the value of your time, treating the hourly rate as basically the hourly rate of one job worked 50 weeks per year times 40 hours per week.
- Nick's: Time not working hourly rate = 2.5 times working hourly rate. Nick from Punny Money makes the distinction between company time and his time, which is something that admittedly my method does not. I take my time as worthless unless I'm making money, which isn't true, and would be mercenary and crass if it were true.
- Shawn's: Time value of money is undefined. Shawn Chong (who has a scooter forum) refuses to put a value on his time because it's way more valuable than money, and to put a monetary value on time would be to acknowledge it as a capitalistic commodity.
So there's a wide range of factors that go into how you value your time:
- You can trade time for money. This is a job. Or the “rat race” as Robert Kiyosaki
likes to say.
- You can trade money for time, up to a point. If it's paying someone to go grocery shopping that's one way. Or having a $1 million operation so that you can live another six months is another thing. But eventually you can't buy more time on this Earth for any price.
- Rest and relaxation is valuable. Hence the reasoning for valuing it high.
- Some time-consuming things shouldn't be automatically traded for money. Hiring a nanny might be a choice (I'm not speaking to situations for which it isn't a choice) but is it really worth it to work an extra 20 hours a week, even if it's insanely profitable in a monetary sense, if it means that you miss your children growing up? I don't pretend to know the answer to this one, but I do know that if I could pull it off with any flair, I'd like to be home more.
Lastly, how you value your time depends on how pleasurable or detestable the activity is (as commenter Chris pointed out) or whether you're spending it with family or friends as opposed to working with a client.
One thing I learned from this post is that it the right answer to “How much is your time worth?” depends on lots of factors. Just like most personal finance questions. 😉
"But eventually you can’t buy more time on this Earth for any price."
I think if one had all the money in the Earth, one could buy all the time on Earth. However, no one is going to be able to test that ;-).
Lazy Man, if one had all the money one would have all the paper/gold/whatever and that money would no longer be valuable. Which is interesting in and of itself.
My time is worth different amounts in different situations. For example, I'll work for slightly less pay in a much more satisfying job with more flexible hours.
I recall my economic lessons. The supply curve for time does not work like it does for other goods.
Typically the higher the price the greater the supply and labor does follow that to a point. However, almost for everyone once price of labor hits a point the supply declines! That is, once one makes a certain amount of money their leisure time is more valuable to them then the money they can earn by working.
I think it was Ben Franklin who said waste my money but not my time! I can recoup the money but not the time.
Time is quite unique since there is only a finite supply for each of us. My supply curve is highly inelastic peaking near full time before falling nearly as sharply, virtually a delta function. The market supply curve is much more gradual.
This is for paid work. OTOH, my marginal rate for incidental household chores is very low, perhaps because of their limited duration. Thus I have a high paid rate, but a low pay rate (what I would pay others for it). Doesn't really seem all that rational but it is the case.
$3/hour based on equation #1 ("Mine").
Hire a Personal Assistant is another way of getting around time constraints. There are cases when a hiring someone to help you with the time consuming details can allow you to enjoy what's most important to you whether its quality time with your family and friends or becoming more productive in both your personal and professional life. It is up to the individual to decide where there value lies.
Hiring a Personal Assistant can be another way around time constraints. In some cases, it is better to hire someone to handle the time consuming details so you can focus on what is more important to you whether it is spending quality time with your family and friends; or becoming more productive in both your personal and professional life. The key to productivity is maximizing your time and increasing your efficiency.