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Time is money, or so they say. But how much is your time actually worth? When you’re deciding what to do with your free time, it can be helpful to put a price tag on it to determine what tradeoffs you’re really making.
Find out what your working hours are worth
The traditional way of putting a dollar value on your time is to consider how much money you earn each year, and divide by how many hours it takes you to earn that money. If you want to get into the details of this calculation, James Clear wrote about it for Lifehacker back in 2015. He advises you to consider all the hours that you spend in the pursuit of earning money, including your commute and daycare drop-off time. Then, simply divide your income by the total number of hours you counted. (Most people, he says, put in about 2,500 hours per year for a full-time job.)
By this math, if you make $62,455/year (the median income for men in the U.S. when he wrote that piece), your time is worth $24.98/hour. So you would be wasting your time if you spend an hour trying to earn or save anything less than $25. And that’s a helpful calculation when it comes to comparing jobs: If you’re looking at a gig that pays more than your current one but has a lengthy commute, for example, it may not be worth the switch.
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. Your free time is yours to use as you see fit, and you already earned your free time by working during working hours.
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Compare your free time to what you could earn by 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 used to, any hour could potentially be a working hour.
In this example, let’s say you have a side hustle that pays $20/hour. If you were to spend an hour shopping around to save $12 on something you need to buy, you might as well just pay the extra $12 and spend that hour working instead. You’ll come out $8 richer than you started.
The trouble with this method is that maybe you don’t want to be working all the time. If you have a choice between spending money or spending time doing a chore—let’s say grocery shopping—you might lean toward paying the delivery fee so that you can buy yourself an hour with no obligations. It’s not about which job you’d like to be working during that time, but rather what you would pay to simply not work at all.
Add surge pricing
Ultimately, the value of an hour of actually free time is one you need to judge, rather than calculate. The way I see it, I only have so many hours in a day that I am willing to use for work (be it paid work or unpaid work, like childcare or household tasks). If I’m so busy that I only have, say, two hours left to myself, you simply cannot pay me enough to give up one of those hours.
In that sense, I think a more logical approach would be to variably value the hours of your day using a surge-pricing model. Under surge pricing, 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 you, and any potential gain has to be balanced 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 to earn that income (including commute time, etc)
- The price of a limited number of “free time” hours is the income you could make during that time if you cared to work. This is based on the rate you get from your side 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 instead of by the day.)
- The price of any remaining free time hours is set by you, according to how much it would take to pry you away from your family and hobbies. Sky’s the limit here: If you would genuinely turn down $200 to be able to sleep in an extra hour on a Saturday morning, then the value of that hour is more than $200.
Using this model, you get to decide how many “free time” hours are available at the rate paid by your side hustle, and how many hours are available for surge pricing. If you have a stressful life or a chronic illness, that number might be zero, and your time may simply be ”unpurchasable.” When it comes to money you spend, this may mean that you will gladly pay an extra $200 to get home from your vacation early to 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 simply cannot afford to get your house professionally painted, but you have the next couple of weekends free, your choices are to either spend your time painting your house or to live with peeling paint. When you don’t have the money, money doesn’t enter into it.
Life is complicated. Just knowing that money and time are related doesn’t mean you can always exchange one for the other at a rate of your choice. And speaking from experience as a former freelancer, looking at every hour of your day through the lens of “what could I be earning now?” is a quick road to burnout.
from Lifehacker https://ift.tt/4uz7ayT
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