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How to calculate the value of your free time

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Photo: Antonio Diaz (shutter stock)

Time is money, they say.but how much your Is it worth your time? When 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.

know the value of working hours

The traditional way to put a dollar’s worth in time is to consider the amount of money you make each year and divide by the time it took to make that money. If you want to know more about this calculation, James Clear wrote about it on Lifehacker in 2015He advises you to consider all The amount of time you spend earning money, like commuting or dropping off at daycare. Then divide your income by the total number of hours counted. (He says most people spend about 2,500 hours a year working full-time jobs.)

According to this calculation, for $62,455 a year (the median income of a US man at the time he wrote this piece), your time is worth $24.98/hour. So if he spends an hour trying to get or save anything under $25, he’s wasting his time. This is a useful calculation when comparing jobs. For example, if you’re looking for a gig that pays more than your current job but has a long commute, it may not be worth switching.

But I don’t think that’s the right way to look at your free time. Even if he spends an hour shopping at the market and saves $20 on something he was going to buy anyway, he’s not throwing $5 away.Your free time is yours to use as you see fit and you are already earned Free time by working during working hours.

compare free time with time earned by working

Another way to check this is to ask yourself what you can do with your time. If you are doing freelance work like before, Any Hours can be working hours.

For this example, let’s say you have a side job that makes $20 an hour. If he spends an hour shopping to save $12 on things he has to buy, he’d rather pay the extra $12 and spend her one hour at work. $8 more than when it started.

The problem with this method is that it may not. I want working all the time. If you have a choice between spending money and spending time on household chores (such as grocery shopping), you may be inclined to pay for shipping. It’s not about what work you want to do during that period, it’s how much you’ll pay if you don’t work at all.

Add surge price

Ultimately, an hour’s worth is actually free time You have to judge, not calculate. The way I see it, we have a limited number of hours in a day that we can work on (whether it’s paid or unpaid work like childcare or housework). If I’m busy and I only have two hours for him, you can’t pay me to give up one hour for him.

In that sense, I think a more logical approach would be to use a spike pricing model to valuate the hours of the day variably. Under surge price, The more demand for something, the more money you have to pay for itIn this case your time is in great demand by youthe potential gains must be balanced against it.

Here’s what such a model might look like in action.

  • the price of your working hours It’s your income divided by the total number of hours you spent earning that income (including your commute, etc.).
  • Price for a limited number of “free time” hours is the income you could earn while you were working if you wanted to. This is based on the rate you earn in your side business and may differ from the rate you earn in your main business. (Feel free to calculate these times in months or weeks instead of days.)
  • You set the price for the rest of your free time, depending on how long it takes to pry you away from your family and hobbies. The sky is the limit. If he really refuses $200 for an extra hour of sleep on Saturday morning, that hour is worth more than $200.

Using this model, you Determine the number of hours of “free time” available for the fees paid in the side hustle and the number of hours available for the surge fee.If you have a stressful life or a chronic illness, that number can drop to zero, and your time can simply become something you can’t buy. spendwhich may mean willingly paying an extra $200 just to get home early from vacation and have time to decompress.

Of course, financial decisions also depend on how much money you spend. Have, not just the amount you want to spend. If you can’t afford to have your house professionally painted, but you have the next few weeks to spare, you have the choice of spending time painting your house or living with the paint peeling off. Money doesn’t go there when you don’t have it.

Life is complicated. Just because you know money and time are related doesn’t mean you can always trade money and time at whatever rate you want.And speaking from experience as a former freelancer, she sees every hour of the day through the lens of “what.” can am i earning now It’s a fast track to burnout.

How to calculate the value of your free time

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