How to Calculate How Much Money Your Free Time Is Worth
Time is money, or so they say. But how much is your time actually worth? It can help you to set a price for your time so you can see what tradeoffs you are making.
The traditional way of putting a dollar value on your time is to consider how much money you earn each year, and divide by how many 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 that you spend in the pursuit of earning money, including your commute and daycare drop-off time. Simply divide your income by how many hours you have worked. (Most people, he says, put in about 2,500 hours per year for a full-time job.)
By this math, if you make $62,455/year (the median income for men in the U.S. when he wrote that piece), your time is worth $24.98/hour. So you would be wasting your time if you spend an hour trying to earn or save anything less than $25. This is a good way to compare jobs: If you are looking at a job that pays more but requires a longer commute, it might not be worth it. But I don’t think this is the best way to view your time. If you spend an hour shopping at a flea market and you save $20 on something you were going to buy anyway, it’s not like you’re throwing away five bucks. Your free time is yours to use as you see fit, and you already earned your free time by working during working hours.
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Another way to look at this is to ask yourself what you could be doing with your time right now. If you do freelance work, like I used to, any hour could potentially be a working hour.
In this example, let’s say you have a side hustle that pays $20/hour. If you were to spend an hour shopping around to save $12 on something you need to buy, you might as well just pay the extra $12 and spend that hour working instead. You’ll be $8 richer than when you started.
The trouble with this method is that maybe you don’t want to be working all the time. If you are faced with the choice of spending money or doing chores, such as grocery shopping, you might opt to pay delivery fees so you can get an hour without any obligations. It doesn’t matter what job you want to do during that time; it’s about what you would pay to have no work.
Ultimately, the value of an hour of actually free time is one you need to judge, rather than calculate. My view is that I have a limit to how many hours I can use for work (paid or non-paid). If I am so busy that I have only two hours to myself, you can’t pay me enough to sacrifice one of those hours. In this sense, I believe it would be more logical to use a surge-pricing model to vary the value of your hours. Under surge pricing, the more demand there is for something, the more you have to pay for it. In this case, your hours are in high demand by you, and any potential gain has to be balanced against that.
Here’s what such a model would look like in practice:
- The price of your working hours is your income divided by the total number of hours you spend to earn that income (including commute time, etc)
- The price of a limited number of “free time” hours is the income you could make during that time if you cared to work. This is based upon the income you make from your side hustle. It may be different than what you earn at work. You can calculate the hours by the week or month, rather than by the day. )
- The price of any remaining free time hours is set by you, according to how much it would take to pry you away from your family and hobbies. Sky’s the limit here: If you would genuinely turn down $200 to be able to sleep in an extra hour on a Saturday morning, then the value of that hour is more than $200.
Using this model, you get to decide how many “free time” hours are available at the rate paid by your side hustle, and how many hours are available for surge pricing. If you have a stressful life or a chronic illness, that number might be zero, and your time may simply be “unpurchasable.” When it comes to money you spend, this may mean that you will gladly pay an extra $200 to get home from your vacation early to have time to decompress.
Of course, monetary decisions also depend on how much money you have, not just how much money you want to spend. If you don’t have the money to paint your house professionally, but you do have the weekend off, you can choose to spend your time painting or to live with peeling paint. Money doesn’t come into your house if you don’t have it.
Life is complicated. It is not enough to know that money and time are connected. You can’t always exchange one for another at your own rate. And speaking from experience as a former freelancer, looking at every hour of your day through the lens of “what could I be earning now?” is a quick road to burnout.
The author of 5 books, 3 of which are New York Times bestsellers. I’ve been published in more than 100 newspapers and magazines and am a frequent commentator on NPR.