How to Calculate How Much Money Your Free Time Is Worth
Time is money, or so they say. But how much is your time really worth? When you’re deciding what to do with your free time, it can be helpful to put a price tag on it to determine what trade-offs you’re really making.
Find out how much your working time is worth
The traditional way to value your time in dollars is to calculate how much money you make each year and divide by the number of hours it takes you to earn that money. If you want to get into the details of this calculation, James Clear wrote about it for Lifehacker back in 2015 . He advises you to consider all the hours you spend earning money, including the time spent commuting to work and daycare. Then just divide your income by the total number of hours you counted. (Most people, he says, spend about 2,500 hours a year on full-time jobs.)
By this math, if you make $62,455 a year (the median income for men in the US at the time of this writing), your time is worth $24.98 an hour. Thus, you will waste your time if you spend an hour trying to earn or save something under $25. And it’s a useful calculation when it comes to job comparisons: If you’re looking for a job that pays more than your current one, but with long commutes, for example, it might not be worth the switch.
But I don’t think that’s the right way to look at your free time. If you spent an hour at a flea market and saved $20 on something you were going to buy anyway, that doesn’t mean you’re throwing five dollars away. Your free time belongs to you and you can use it as you wish, and you have already earned your free time by working during working hours.
Compare your free time with what you could earn by working
Another way to look at this is to ask yourself what you could spend your time on right now. If you’re a freelancer like I used to be, any hour can potentially be a work hour.
In this example, let’s say you have a part-time job that pays $20 an hour. If you spent an hour shopping to save $12 on something you need to buy, you could just pay the extra $12 and spend that hour working instead. You will come out $8 richer than you started.
The problem with this method is that you may not want to work all the time. If you have a choice between spending money or doing chores around the house—say, going to the grocery store—you might be tempted to pay for shipping so you can buy yourself an hour with no strings attached. It’s not about what job you’d like to be working at that time, it’s about how much you’d pay to just not work at all.
Add a higher price
Ultimately, the value of an hour of truly free time should be valued, not calculated. In my opinion, I have as many hours in a day as I am willing to use for work (be it paid or unpaid work, such as childcare or housework). If I’m so busy that I only have, say, two hours for myself, you just can’t pay me enough to give up one of those hours.
In that sense, I think the more logical approach would be to vary the cost of your day’s hours using a sharp pricing model. In spike pricing, the more demand for something, the more you have to pay for it . In this case, your watch is in high demand, and any potential benefit must be balanced against this.
Here is how such a model would look in practice:
- The price of your working time is your income divided by the total number of hours you spend earning that income (including travel time, etc.).
- The price of a limited number of “free time” hours is the income you could earn in that time if you wanted to work. This is based on the rate you get from your side job, which may be different from what you earn from your main job. (Feel free to count those hours by month or week instead of by day.)
- The price of any remaining hours of free time is set by you , depending on how much time you need to distract you from family and hobbies. The sky’s the limit here: if you really forgo $200 to be able to sleep an extra hour on a Saturday morning, that hour’s worth is more than $200.
Using this model, you can decide how many hours of “free time” are available at the rate your part-time job pays, and how many hours are available at bargain prices. If you have a busy life or a chronic illness, this number may be zero and your time may simply be “non-buyable”. When it comes to the money you spend , that could mean you’re happy to pay an extra $200 to get home from your vacation early so you can relax.
Of course, money decisions also depend on how much money you have , not just how much money you want to spend. If you just can’t afford to have your house professionally painted but have the next few free weekends, you can either spend your time painting your house or live with peeling paint. When you don’t have money, money doesn’t come into it.
Life is complicated. Just knowing that money and time are related doesn’t mean you can always trade one for the other at the rate you choose. And, based on the experience of a former freelancer, looking at every hour of my day through the prism of “what could I earn now?” it’s a fast track to burnout.