Over the years I have learned to appreciate the value of time more than the value of money. I am writing a whole blog about money, so money is absolutely important in my eyes: You need money for housing, basic necessities (clothing, food,…), having 3–6 months worth of expenses in the bank will give you peace of mind, the bigger your bank account the more choices you will have,…
The thing is, with money you can lose some then make some again, make more, make even more and there are virtually no limits to how much you can make. With time it is different: You can waste plenty of time binge-watching re-runs of Desperate Housewives on a rainy Saturday afternoon but you cannot recover that time or make more time. No matter who you are, where you live, we all have the same 24 hours a day.
With that in mind, it is easy to realize that your time becomes even more precious.
Time is money
You have probably heard it from friends or family before: “I make 50 thousand euros a year, so one hour of my time is worth 25 euros” (quick back-of-the-napkin calculation: divide your yearly wage by 2 and remove three zeros). Okay, your friends or family members might not be so open about their income but this is how most people calculate their time. While it makes sense for the time spent at work, I always thought there was something wrong with that approach for the simple reason that I do not work in my free time. If we remove the passive income streams (rental of garages, dividend income,…) I do not make a single cent. So, what is a better way to put a figure on my free time, how can I value it?
Why is that even important to know?
You are probably not a numbers nerd like me but how you value your free time will help you in making decisions which will then free up time for doing the things you enjoy.
Here are a few situations where the test will help you
- It is late and you are going home, should you take a taxi which will save you 20 minutes compared to the bus?
- Does it make sense to hire a cleaning lady charging 15 euros per hour? To me this is a no-brainer, I have hired one ever since I bought my first property. I am not lazy, I am highly value-negativeon cleaning, period. But am I paying too much according to my free time value? This I do not know.
- How long should you debate over buying a 20 euros purchase? Raise your hand if you think you sometimes spend too much time comparing two Airbnb options with little price difference. (You cannot see me but I am raising my hand too!)
- You found a side-gig that will pay you 20 euros per hour, should you go for it?
- Should you buy a Flash-pass at Six-flags and save your standing in line time?
- Should you buy gas 9 minutes away because it is ten cents a gallon cheaper? Below is the comic you will find during the test
The ultimate test
As I was asking our friend Google how to figure out the value of my time I found this free test by Clearer Thinking and it gave me exactly what I was looking for.
Here is how they describe it :
“This tool will ask a series of questions to help you estimate how much money each hour is worth to you, so that you can make wiser decisions about how to spend that time. It’ll also provide you with a customized report based on your results that highlights any inconsistencies in your answers and makes concrete suggestions for applying your newfound knowledge in your daily life.”
“So if you currently work 35 hours a week, for instance, this tool will estimate how much money you’d need to put in a 36th hour of work. Here’s another way to think of the same idea: the additional hour value of your time is the amount of money you’d pay to free up an hour of time.”
Fantastic, this is exactly what I wanted to know!
The test took approximately 10 minutes (probably the best 10 minutes you will invest in a test this year) and by walking me through different scenarios gave me the answer to how much my free time is worth to me.
My result was 60 euros per hour. If we take the examples above this means that
- My cleaning lady’s rate is 13 euros per hour, that is perfect: she does it better than me, she enjoys it and she charges below 60 euros per hour.
- In 2011 I had a side job at a Technical Stock Analysis firm next to my full-time job, while I enjoyed the work and the colleagues there, I was paid far below the 60 euros per hour. Something for me and you to think about if we are planning to earn additional income.
- I have improved my decision-taking time when buying stuff over the years but knowing I should not spend more than 20 minutes on a 20 euros purchase will help me greatly. Ironically, some people spend less than 1 hour on deciding to purchase a 300 000 Eur home!
- In 2011, I went to Magic Mountains with my buddy Gérard and although we found it ridiculous at first we ended up buying the flash-pass. I do not remember the exact price but from the current prices, I would deduct that it cost us approximately 60 dollars each. In hindsight it was a great investment in our free time: We did all the rides we wanted to and saved more than 1 hour in the queues for sure.
And there are plenty of other situations that will be more relevant to you :
- Hiring someone to mow the lawn so you can spend your Saturday afternoon with the kids.
- Pay a premium to have your groceries delivered at home so you can go straight home after work, skip the lines, the traffic and read that awesome book!
- Have an accountant file your yearly tax declaration for a mere 50 euros, saving you hours and hours of boring research and telephone calls to the tax authorities so you can relax and have that date night with your spouse.
- etc.
Of course, once you have completed the test you will need to see for yourself according to your situation if the suggestions make sense. If you have to choose between paying your phone bill or hiring a gardener (who charges 20 euros per hour) to mow your lawn, pay your bill and do it yourself. Even if your time is worth 30 euros an hour to you.
What now?
What are you waiting for? Take the test now and find out how much your free time is worth to you! As you will find out the number and suggestions they make all need to be taken with a grain of salt, this is not an exact science after all. To me, this test was both fascinating and very practical. I hope it helps you to make better decisions and as well to free up more of that scarce time!
Let me know in the comments below if the results have surprised you and how it will impact some of your decisions. I am curious to hear!
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Disclosure: I am the author of the same article on www.joneytalks.com.