Time is money: How to assess if a cost-saving activity is actually worth your time
Exchanging time for money is a fundamental part of everyday life. When you go to work, you trade your time and labor for a paycheck. When you’re too tired to cook dinner, you exchange money for the convenience of a fast-food meal. When you go out with a partner, you pay a babysitter to free up your time.
We often make these exchanges without much thought. However, for most people, time is their most valuable resource. It’s essential to manage it effectively. Whether you’re taking on a freelance project, negotiating a salary, or hiring someone for a task, it’s clear how time and money interact. But in some situations, a more thoughtful approach is needed.
So, how do you determine what your time is worth? There are a few ways to figure it out. If you’re employed, your hourly wage can serve as a useful starting point. If you’re happy with both your job and salary, this is a solid estimate of your time’s value. Alternatively, you can calculate how much you need to earn daily to cover your living expenses and save for the future. By dividing that amount by 8 or 10 hours of work, you’ll get the minimum hourly value of your time.
Once you have a clear value for your time, it’s easier to decide whether a cost-saving activity is worth it. Below are some scenarios where you can evaluate whether the time invested is worthwhile.
We often make these exchanges without much thought. However, for most people, time is their most valuable resource. It’s essential to manage it effectively. Whether you’re taking on a freelance project, negotiating a salary, or hiring someone for a task, it’s clear how time and money interact. But in some situations, a more thoughtful approach is needed.
So, how do you determine what your time is worth? There are a few ways to figure it out. If you’re employed, your hourly wage can serve as a useful starting point. If you’re happy with both your job and salary, this is a solid estimate of your time’s value. Alternatively, you can calculate how much you need to earn daily to cover your living expenses and save for the future. By dividing that amount by 8 or 10 hours of work, you’ll get the minimum hourly value of your time.
Once you have a clear value for your time, it’s easier to decide whether a cost-saving activity is worth it. Below are some scenarios where you can evaluate whether the time invested is worthwhile.
1. Clipping coupons?
Couponing is a classic frugal living strategy. Seasoned couponers spend hours sifting through weekly ads, compiling lists of discounts, and organizing coupons. This process can easily take 10 hours a week, with savings around $90.That’s an effective hourly rate of $9. Would you work for $9 an hour? Considering the flexibility and the work-from-home aspect, it might be worth it. However, it’s important not to view the $90 as “free money.” It’s a result of time-consuming effort.
2. Shopping at a second-hand store?
Thrift store shopping can also be a time-consuming activity. You might spend hours browsing through disorganized racks, often leaving empty-handed. However, the savings can be significant. For example, you could find a dresser that costs $50 at a thrift store instead of $200 at a retail store, saving you $150.If you manage to score such deals once a month, spending about four hours on each trip, you’re effectively earning $37.50 per hour. In this case, spending time shopping at thrift stores could be a valuable investment of your time.
3. Managing your own retirement fund?
Managing your retirement fund takes significant time and effort. You’ll need to stay updated on financial news, learn complex terms, and invest considerable time researching. Initially, this might take four hours per week for a month to get up to speed, and an additional two hours per week afterward to stay informed. By the end of your first year, you might spend 160 hours learning and managing your investments.However, the potential savings are considerable. For example, with a median retirement fund of $101,630, a financial adviser might charge a 2% annual fee ($2,020 in the first year). By managing your own retirement fund, you’d be “earning” around $12.70 per hour in the first year, and this would rise to over $19 per hour in subsequent years.
Ultimately, the value of your time depends on personal priorities and how much you enjoy or benefit from an activity. Always weigh the time investment against potential savings to spend your time wisely. It’s the most important asset you have.
Disclosure
All information presented on this page is for educational purposes only and doesn’t constitute tax, legal, or accounting advice. It is to be considered as general information, not recommendations. Please consult with an attorney or tax professional for guidance.