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.