A few days ago, I talked about how to determine if your job is keeping you from a bright financial future. In that post, I addressed how to understand the difference between what you’re earning now and what you’ll likely earn in the future, as well as figuring out how much your job is worth to you. Now I’d like to take a step further into these topics to discuss how much your time is worth.
I’m going to venture a guess to say you may not have thought about this before. In fact, I should clarify what I mean. We tend to think of finance in terms of what happens to us:
- How much will I save by buying groceries at this other store that is farther away but has cheaper prices?
- How much extra money will I have if I take on a side job?
But what we don’t often think about is what we put in to get the benefit:
- How much money will I spend in gas to get to the other store? How much of my time will be spent going back and forth to this store that’s farther away?
- How much of my time will I lose in order to earn extra money at this side gig?
Do you see the difference? The first set of questions are all about getting a desired end result. The second set of questions venture to learn what you have to do (and what you will lose – time and/or money) to achieve these results. It’s not common for many of us to address a situation with both of these sets of thinking, but this blog post will show you why it’s a good habit to get in to.
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How Much Is Your Time Worth: Establishing Priorities
First thing’s first. What do you want or need in your life above all else? Is money your greatest need? Is time your greatest need? Trying to get one could cost you the other so it’s extremely important to weigh this carefully. Otherwise, you could make decisions that actually cost you both of these things at the same time. For example:
As shown above, you may have found a grocery store that is farther away but touts prices up to 20% less than the store in your neighborhood. If you immediately jump on the opportunity to save money without thinking it all the way through, you could end up losing an hour of your time going back and forth and spending the money saved in the extra gas used. This ends up being a lose-lose situation.
How Much Is Your Time Worth: Calculating the Cost-Benefit Analysis
In many cases things won’t be that difficult. You can usually see a clear difference in what you are losing out on and what you are getting more of. The second question above is a perfect example of this.
Let’s say you are approached with an opportunity to earn extra money on the side. The person tells you that you can work from home and you’ll get paid $25 per hour. No brainer? Not quite. How much do you already work and how much of a priority is that extra money? It’s clear that you will lose time and gain money in this case. But even if you value money over time at this point, this still may not necessarily be the right decision for you.
This is where the cost-benefit analysis comes in. If you determine that you need money more than time at this point, then you’ll want to move forward with some sort of side income – but that doesn’t mean you should go for this one. Are there other opportunities that could actually pay you more per hour? If so, you can work longer and earn more or you can work less and earn the same (thus gaining both time and money). Spending the time to do your research on this could pay off big in the end. So to decide what the right opportunity is, you have to do a cost-benefit analysis. What will this opportunity cost and what will you gain?
How Much Is Your Time Worth: Determine the Value of Your Time
Once you’ve gone through these steps, you should settle on a real number for the value of your time. If a job on the side that pays $25 per hour isn’t worth it for you to lose that hour of time, how much would you take to lose that hour of time? Is there any amount? If not, then clearly you value time above all else since you’re valuing it as priceless. But if there is an amount that you think is worth losing time, you should find out what it is. Once you have the number, stick to it.
For example, let’s say you’ve decided that your free time is worth $50 an hour. This makes future decisions much easier. Let’s revisit the example above. If it takes you 30 minutes to get to the cheaper grocery store, then you’d need to save $100 on your groceries plus the amount of gas just to break even. As far as the side income example goes, you now know you wouldn’t take a side job unless it pays $50 per hour.
How Does This Relate to Your Career?
Unless you are independently wealthy, won the lottery, or saved up a lot of money, chances are you have to work. But aside from fulfillment at your job or career, you should determine if the time you’re spending is equal to, less than, or more than, what you’ve determined your time is worth.
Calculate your take home pay by the hour – how much does it amount to? If it’s equal to or more than the value you determined, then that’s fantastic! Now all you have to worry about is if you feel fulfilled in your career (or if you are at least on that path). So what if it’s less? You may have some evaluating to do. Just because we all have to work, that doesn’t mean we can’t optimize the hours of the day we spend working. Believe it or not, knowing this number (rather than annual salary) can really empower you to do what you have to in order to reach it. It’s easy to feel like we’re “slaves to the man” but when you realize that your time is valuable – so valuable that you’ve actually assigned a tangible value to it – then you may find yourself doing whatever you need to get that promotion or change that career path.
Don’t be frivolous in your decisions – by informing them in this way, you will ultimately empower yourself to move forward and find a way to go get what you believe you are valued at. You may find that you’re worth more – and can even get more – than you expected.
This article is part of our Career Tips Resource Center. If you’re looking for additional information about career tips, be sure to pay a visit!
Image Credit: maveric2003