What Is Your Time Worth?


If a top hedge fund manager takes out his own garbage, you could say that walk to the end of the driveway cost him more than $100,000. When you earn $3.9 billion in one year, your time comes to be worth a lot — even when you’re not working. That’s because time and money have a very tight relationship. If you earn a lot of money through a high-powered career like managing a hedge fund, you won’t have much time for a personal life. And you certainly won’t have to take out your own garbage. Having more personal time tends to mean having less money. That is, unless you earn so much that you can buy it. But while everyone likes to use the quip that “time is money,” especially when they’re feeling impatient, this equation doesn’t always add up in quite the way people think. (See also: That Age-Old Conundrum: Time vs. Money)

What's "Worth" Your Time?

I think we can all agree that time has value. Like money, it’s a finite resource (not to mention the fact that we’re always searching around for more of it). Unfortunately, we often throw it away in the same careless way we might throw around our money, not realizing that they are the same thing.

For example, a lot of people might say they don’t have time to cook dinner, so they pay to have someone else cook it for them in a restaurant. Now, if you’re Mr. Hedge Fund Manager, this is a trade with a lot of value. After all, for someone who makes about 44 million per hour — and that’s assuming that he works 24 hours per day, 7 days per week — paying someone a few dollars an hour to cook for you is a great bargain. For someone who makes a lot less, though, this equation starts to look a little lopsided. The same goes for other things we often opt out of in the name of time, such cleaning the house or making minor repairs on the car. The problem is that if you break your time down in the same way as the hedge fund manager, your hour may not cover what you’re paying the house cleaner or the mechanic. That doesn’t mean paying them to do the work for you doesn’t have value, but it does mean that it’s an expensive transaction, and you have to be careful about how much time you buy this way.

The Cost of Opportunity

There’s another aspect to the time/money equation, and that’s opportunity cost. Opportunity cost refers to the financial impact that one choice you make has on another. So, if you decide to leave work early to come home and spend time with your family, that has an opportunity cost; you gave up the opportunity to earn your hourly rate for one additional hour in exchange for more time at home. You could also consider this in terms of going back to school to gain the skills to earn more money. If you’ve thought about doing this, you probably realize that it’ll cost you more than just tuition, but also the wages you could have been earning if you weren’t in class. That’s opportunity cost, and it also helps determine what our time is worth. So, when you're deciding whether to do some work around the house yourself or pay someone else to do it, opportunity cost can be a way to work out the value of doing your own labor.

Working Out the Value of Your Time

We know that a hedge fund manager's time is worth millions an hour, so be warned — for most everyday people, calculating the value of your time will be a sobering experiment. One way to do this is to look at how much money you made in the last year. Then, consider any expenses you incurred because of your job, such as childcare, transportation, clothing, etc. Subtract these expenses from your earnings.

Now consider how many hours per day you spend to make this money. While you might only spend seven or eight hours per day at your post, you should also factor in commute time, business travel and dinners, and other time you have to spend because of your job. While you may not be paid during these hours, they aren't your time to use as you please, so you have to count them.

Finally, take what you earned (minus expenses) and divide it by the number of hours you worked (plus additional time related to your job). This is how much your time is worth per hour, and chances are it's a whole lot less than you thought you were making. That's not a bad thing, but it does put the value of your time into perspective. After all, if you're really only making $9 per hour, the value of doing more things for yourself rather than hiring others becomes more clear. This is especially true if you don't have the kind of job where you could put in extra hours rather than mowing your lawn.

The Real Value of Time

So does this mean you have to avoid restaurants, fix your own car, darn your own socks, and make your own clothes? Not necessarily. There are two reasons for this. The first is that in the U.S., many people make a lot more than they need to just get by. That means they can afford to buy some time as well. In the Great Depression, when a lot of people were stuck without work, they spent a whole lot of time working out ways to avoid having to buy anything much at all. That’s because they had the time, but no money. Think about this when you decide what services to buy. Generally, the smartest move is to hold tight to what’s most dear; if you have money, you can buy time, and if you have time, you can do more of your labor.

The second reason why we buy time is that spare time has intangible value, while money has a diminishing utility. Once your needs are met and you've maybe paid for a few luxuries, spending extra time working fails to deliver a much more comfortable life. Leisure time, on the other hand, has its own special value. I think we all understand this implicitly when we’re lolling on the couch on a lazy Sunday or spending a rainy afternoon in bed with a book.

The Bottom Line on Time

The question of how much your time is worth is a personal one. Just like anything in personal finance, it involves striking a balance between what you want and what you can afford. Time and money are finite resources. So while we’ll probably always be scrambling for more of both, how we eventually spend them should reflect what’s important to us.

How do you value your time, and how do you decide what to do yourself versus hiring others to do it?

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Guest's picture

Unfortunately I still don't have a good excuse not to take out the trash! Haha.. I have been learning lately just how important my time is. I'm really working on maximizing my time both on the job and with my family and friends.

Guest's picture

I think it also comes down to how much is my time worth to *ME*.

The more I care about myself and let go of the insecurities around that, the more my time is valuable to me when I am doing something that I want to do. :)


Guest's picture

If your capable and want to do it, then it is worth your time. Dollars and sense should not be par of the equation unless it has to do with work. If the hedge fun manager derives satisfaction out of taking out the trash then its worth it,if he dreds it then its not. Your time is best spent doing what you enjoy both at work and in your leisure

Guest's picture

I have talked to many people about putting a value on their time. Especially when they are trying to be frugal and save money. If it saves you $50, but takes 10 hours of your time, you're "working" for less than minimum wage.