Part of taking control of your money is knowing what your time is worth.
We are constantly trading time for money and vice versa. In fact, almost every transaction we make that involves money also involves time. We make money by spending time.
But how much time should you be willing to give for a certain amount of money? That depends on what your time is worth.
This page may contain affiliate links. For more information, see the full disclosure here.
Calculating How Much Your Time is Worth
How Much Time Does It Take to Make Your Money?
First, consider how much time you spend each year to make money. You will obviously include the hours you are physically at your job, but don’t forget to include the time you spend commuting and doing other tasks that enable you to do your job.
For example, if you spend 40 hours a week at work but your commute takes an hour each way, you are actually spending 50 hours per week to earn your weekly income. In this case, the amount of time you spend each year (assuming you take 2 weeks vacation time) is approximately 2,500 hours.
How Much Do You Make?
Next, calculate how much you make in a year.
If you are salaried, you probably already know. For this exercise, though, only consider your post-tax income. If you’re not sure how much that is, just multiply your last paycheck by the number of paychecks you make each year.
Hourly employees can do the same thing, multiply your paycheck by the number of paychecks you get each year to determine your annual take-home pay.
Divide the Two
Once you know both how much time you spend making money and how much money you actually make, you can calculate how much your time is worth. Simply divide the amount you make by the time it takes to make it.
Are you surprised by the outcome?
I know I was surprised the first time I calculated the worth of my time. At the moment, my time is worth approximately $13.29, despite my official income being much higher than that.
Do the Ways You Spend Your Time Reflect What Your Time Is Worth?
Calculating your time’s value is interesting, but it isn’t particularly helpful information unless you actually decide to use it.
For this information to be valuable to you, you should use it when thinking about the ways you make money and the ways you spend (or save) money.
Ways You Make Money
With the rise of the internet, we now spend a lot more time trying to make small amounts of money, mostly through selling unwanted items that we find around our house.
Would you be willing to spend 30 minutes driving to/from someone’s house to sell them something for $5 via Craigslist? That’s fine as long as an hour of your time is worth less than $10. You should also consider the time spent posting the item and communicating with potential buyers.
Many of the little ways we make money probably aren’t worth the time we spend on them.
Ways You Spend (or Save) Money
You can also use your hourly worth to examine the value of the time you spend either spending or saving money.
For example, I recently discovered that I can do curbside pick-up for all of my groceries for a fee of $5 (I don’t even have to get out of my car). Because it typically takes at least an hour to walk through the store and pick up items on my own, using the pick-up service is definitely a good trade-off, considering my $13.29/hour worth.
Similarly, if you are spending more time than savings are worth to get savings, you are not using your time well. You don’t need to spend 2 hours to find a flight that is $20 cheaper.
You can also use your time’s worth to determine whether you should hire people to help with certain tasks. This is particularly helpful if the time you save is going to be used making more money, but it can also be used when considering the value of time you would be able to spend with friends or at the beach or exploring a hobby.
For example, if your time’s worth is $15/hour and you could make that amount if you had another hour to work, you might want to consider paying someone $10 to mow the lawn so that you can spend that hour working.
Also consider the value of time with friends/family or doing other activities. You may value this time differently than your calculated time’s worth for many reasons, but if you value time with friends at $20/hour, you may be willing to spend that much to free up an hour of your time to hang out with your friends this weekend. Keep this in mind when thinking about how much you should delegate.
One Last Note
What do you need to do differently based on your time’s value?
I’d love to know what you plan to do differently. Send me an email!