Chapter 18
Time Equals Money
IN THIS CHAPTER
Figuring out your hourly income
Increasing your hourly value
Budgeting time wisely in your personal life
Successful people place a higher premium on their time, both in terms of its monetary value and its psychological value. When you talk about productivity, earnings, goals, family, and health, all of those important factors in overall quality of life are interconnected and influenced by their time utilization.
Success is not measured by any single scale or ruler in life. We all have our own unique way of determining success. Depending on your values, different kinds of numbers may be important to you. To some, it’s cholesterol count and blood pressure figures; to others, it’s the number of years they’ve been married. To many, the sum total in their retirement account is the number-one measure, and some people focus on the amount left on their mortgage.
But I contend that your per-hour worth should be among the top-of-mind numbers that are important to you — no matter what your values or priorities are — even if you don’t earn your living on a per-hour rate. Knowing the value of your time enables you to make wise decisions about where and how you spend it so that you can make the most of this limited resource according to your circumstances, goals, and interests. This focus will lead to greater success, fulfillment, and wealth.
Obviously, the higher you raise your per-hour worth, while upholding your priorities, the more you can propel your efforts toward meeting your goals. You will have more resources at your disposal: more money or more time, whichever you need most.
Why Your Hourly Rate Is Important
Your per-hour value translates to your quality of life, both now and in the future. Not only does your income influence how you spend your nonworking hours, but it also determines how much leisure time you have to spend. In traveling the world to speak to success-focused audiences, I have found few people who want to earn less money. There is a direct connection between your income and wealth and your sense of success or achieving success. One measure that has a direct and significant influence on the quality of life is hourly rate.
As you can imagine, your hourly value reaches beyond the basics, as it impacts your health as well. For example, studies show that lower-income earners have more health problems, including heart disease and diabetes, which are often attributed to poor diets and a lack of medical care. Additionally, the challenge of trying to make ends meet can cause great stress, leading not just to physical illness but also to depression and other mental health problems.
And though it’s important to live in the present, it’s also important to keep an eye toward the future. How well you prepare does have an impact on your quality of life right now. Making enough money to be able to save for retirement and other major life expenses — including a child’s education — results in a sense of comfort and safety about your future.
Your personal time has value, too. And by having a grip on the value of your work hours, you gain a better grasp on what your downtime is worth. After all, most people work so they can make the most of their personal time, whether they’re devoting it to family, hobbies, volunteer work, travel, or education.
When you recognize that your free time has a monetary value just as your work time does, you are able to achieve a more successful work/life balance and a more fulfilled mental state. You gain the perspective you need to make choices:
- Is the extra money you’ll gain by working overtime worth giving up your holiday with your family?
- Could you go part-time and stay at home with your small children?
- Can you afford to take a leave of absence to do a volunteer stint in Haiti?
- Should you take on a freelance project that means giving up all your free time for three months to fund your dream trip to Bali?
But what is an hour of your personal time worth? Well, that’s not a question you can easily answer. How do you put a price on time with your young children? Or apply a dollar value to travel experiences that bring you in touch with new worlds? Or equate the quiet therapy of a walk in the woods with the stress of a work presentation?
The harsh truth is that you don’t get paid for not working. But that doesn’t mean your personal time has no monetary value. Just thinking about your time as a commodity with a value helps you sort through and recognize the activities that are most important to you. (For information on valuing your personal time, see the later section “Making Value-Based Time Decisions in Your Personal Life.”)
Calculating Your Hourly Income
No matter your occupation, everyone sells time for a price; it’s just a lot more transparent in some situations than others. Most obvious are individuals who receive a wage or a fee based on the hours they work, including minimum-wage workers and self-employed individuals such as tutors, house cleaners, and consultants.
Other people advertise their prices based on a per-project basis, but in reality, they base that fee on an estimate of project hours the job takes. Freelance writers, for instance, may charge $1,500 to write a promotional brochure, but that amount is likely a reflection of the writer’s value of his or her time at a certain figure — say, $75 per hour.
In today’s “gig economy,” there are more people in short-term employment, work-for-hire situations, and side job ranks than ever before. Examine the number of people you know who have a side hustle as an Uber or Lyft driver. How many people do you know who take jobs through Fiverr or Upwork to earn extra income? While I'm an author of many books, including several for the Dummies brand, writing is not my primary focus. I also speak, coach, and consult.
Some businesses and professions charge customers based on an hourly rate, although workers don’t directly receive that per-hour fee. Instead, their salary or compensation is based on the revenue the company can bring in based on those hours. Law firms and plumbers, for example, may charge for their services on an hourly basis and pay their employees a salary or a per-hour rate.
If you earn a salary, you may not perceive yourself as having an hourly rate. But everyone does. Here’s how to calculate your hourly income. This number doesn’t affect how you’re paid, but it puts you in touch with what an hour of your work time brings you.
Calculate the number of hours you work per week.
Work hours/day × days/week + overtime = hours/week
To be completely accurate, calculate your hourly rate based on the hours you actually work. If you consistently put in more than 40 hours per week (most salaried folks aren’t paid overtime for additional hours worked), add those hours to your total. Here’s an example:
8 hours/day × 5 days/week + 2 hours overtime = 42 hours/week
Figure out how many hours you work per year.
Work hours/week × weeks/year = hours/year
Make sure you subtract time off. For instance, if you take three weeks of vacation each year, subtract that from your total number of weeks worked. If your salary is based on a three-week vacation and an average 42-hour work week, here’s how many hours you work per year:
42 hours/week × 49 weeks/year = 2,058 hours/year
Divide your gross salary by the number of hours you work per year.
Salary × hours/year = hourly income
For example, $80,000 divided by 2,058 hours is $38.87.
Boosting Your Hourly Value through Your Work Efforts
For especially successful people, money isn’t the scarcest and most valuable resource; time is. There are plenty of ways to make more money, but there’s no way to add more minutes to an hour. You have a limited amount of this precious commodity, so you want to protect it and spend it as if it’s your own personal trust fund. For less successful people, they usually feel the lack of money or capital is their biggest issue.
The truth is, lack of productivity or lack of service value is more stunting than lack of funds.
Most people think that if they work more hours, they’ll automatically make more money. That’s faulty thinking: You can devote more hours to work, but if you invest the hours in the wrong actions, you gain nothing — and you lose time.
The solution may be to ask for more money for your time. Some workers have a good deal of control over their hourly income and can therefore charge more per hour for their services. The freelance writer can raise her hourly rate from $65 to $70 and bring in an additional $50 on a 10-hour project. A tax accountant can increase the fee for income tax preparation from $450 to $510. If she needs six hours to prepare the average income tax return, the accountant just gave herself an increase from $75 to $85 per hour.
However, the simple fact is that most people don’t have the luxury of raising their income at will. So what’s the next best step? Change how you use your time so that you get the best return on investment. After all, what you do with your time leads to greater prosperity.
Increasing your productivity
To increase your hourly value, you have to decide whether you’ll work toward earning more money or earning more time. Then focus on performing high-value activities to achieve that goal. The process of discovering the really important actions or items you can invest your time in can help you change your hourly rate. The decision of how to increase your hourly value — whether to work toward generating more money in the same amount of time or generating the same amount of money in less time — depends on your circumstances:
- If you’re in a commission or bonus compensation structure, you can increase productivity to earn additional income.
- If you’re in a salary-based position, you can find ways to be more productive within the 40-hour workweek and reduce the additional hours you put in.
Increasing your income
If your job doesn’t enable you to increase your hourly value, whether in terms of money or time, then you have bigger decisions to make. Other changes you can make to directly impact your income are to simply do the following:
- Find a similar job at a company that pays a bigger salary or offers more freedom with your work hours.
- Improve your performance and earn a raise or a promotion. Know, however, that the success of your efforts toward a raise or promotion is ultimately up to the higher-ups.
Improving your quality of life
When evaluating time-for-money trades, be sure not to limit your definition of return to money: Ask yourself whether the exchange improves the quality of your life. Look at how your life would change outside of work if you were to double or triple your hourly rate. If what you’re trading for dollars does any of the following, it’s a good trade:
- Increases your ability and opportunity to earn more money
- Increases your amount of family time
- Decreases your work hours
- Enhances your physical and mental fitness
- Provides an opportunity for someone who needs it
- Removes something you don’t enjoy or don’t do well from your life
Success is about progression, being better today than you were yesterday. It’s about progressing or moving toward your desired outcome or objectives. When you really dig down with the preceding questions to create a plan or strategy to improve time performance and value, you are on your way to success.
Making Value-Based Time Decisions in Your Personal Life
When you consider the way you live your personal life, divide your focus in two: chores/responsibilities and leisure time. Although personal time may seem straightforward, there really is a difference between chores and leisure activities, and the way you approach your time-management decisions hinges on that difference. But however you spend your personal time, you can assign that time a value equal to your work worth — even though no one’s paying you — to help you decide how to spend it.
Deciding whether to buy time: Chores and responsibilities
When you have a handle on the value of your time in hourly increments (see the earlier section “Calculating Your Hourly Income”), you have the information you need to make better time choices. The chores have to be done, whether you do them, delegate them, or even pay someone else to do them. The question with chores is whether you want to do them yourself or to exchange dollars for someone else to do them. You have to ask, “Is the cost of the time this task would take me greater than or less than the cost to hire someone to do the work?” Here, you’re simply comparing numbers.
Think of the list of household chores and personal errands that can eat up every bit of personal time you have. If you could pay someone to do some of those tasks at a rate equal to or well below your hourly rate, wouldn’t that be a good return on investment?
For example, paying $50 to have your grass cut each week may have been a cost barrier you couldn’t get over before. But if you’ve determined that the hourly value of your time is $50 per hour and it takes you 3 hours to mow your lawn, you’ve just bought yourself $100 worth of time ($150 worth of your time minus $50 to outsource the work). On the other hand, if you have all kinds of free time on the weekend — and you enjoy being out in the yard — paying someone else to cut your grass may be a money-time trade that has no value for you.
If you love to garden but hate cleaning the house, and cleaning the house takes you 4 hours ($200 if your time is worth $50 per hour), why not pay a housecleaning service $100, $125, even $150 to buy back the 4 hours it’d take you to do it all? And you buy yourself 4 blissful hours puttering over your zinnias and scarlet runner beans.
You should reevaluate your trades periodically because your attitudes can change over time.
A few years ago, Joan and I acquired a vacation home that my father and mother had built themselves in the 1960s. It needed a lot of work because it was stuck in the 60s. I had grown up doing construction work with my father. I had learned carpentry, painting, finishing carpentry, plumbing, and light electrical. Because I did a lot of maintenance and tenant-improvement work on my father’s commercial buildings, to say I was burned out on construction projects is an understatement. I've had numerous properties to renovate and improve that I have bought in the last 15 years. I didn’t feel the need, or the desire, to lift a hammer anymore. But at the lake house, where my father physically hammered in every nail by hand, my thinking changed. It has been very rewarding and time consuming to renovate this family property back to life.
Making time-spending decisions: Leisure activities
With leisure activities, your decision simply hinges on whether you want to do them at all. Unlike chores, which you have to deal with in some way, you can get away with forgoing certain pastimes. When you’re faced with decisions on whether to accept an invitation or volunteer for a committee or do any other activity, that can affect your leisure time.
Looking at rewards
A leisure activity has to bring you as much joy or value as your hourly income rate. Some things you do will be priceless, but others are worthless or even less than worthless because they drain you rather than fill you up. So with leisure activities, you aren’t comparing numbers. Instead, you simply decide whether a given activity is worth your hourly value. Consider the value of the activity in terms of …
- Your personal enjoyment
- The service you want to do for someone
- The support to those who are less fortunate than yourself
- The desire to pay it forward
- The legacy you want to leave to others
These are evaluations that successful people make with regard to free time. The desire to retire, for most successful people, is rooted in freedom — the freedom to choose what to do with your time each day or week in a manner you decide.
Factoring in monetary and time costs
Another factor to consider when choosing leisure activities is the cost of your free time. Often, that time isn’t so free because you undertake activities that require some recreational funds. When you have to pay to enjoy certain recreational or leisure activities, take the cost of the activity and add it to the monetary time-cost you’d have to pay for the activity. In short, would you pay the cost in your hourly value (plus any costs of the activity itself) to participate in that activity?
Say your income equates to $35 per hour. If an acquaintance you’re not all that crazy about invites you to her jewelry party on a weeknight, you’d be looking at, say, a 2-hour cost of $70, plus any money you’d spend while there. Should you go? Probably not, if this acquaintance really isn’t someone you prefer to spend your time with.
Or how about this scenario? A local nonprofit asks you to be on a committee that requires an average of 10 hours per month. Total value: $350 worth of your time each month. Is the value earned from your time donation worth the cost to you? How does it factor into your overall goals? Do you enjoy being on the committee and do you feel passionate about the nonprofit’s mission? Do you have other more important things you have to tend to first?
The money-to-time-value consideration extends to even the seemingly most mundane of activities — for example, dining out. Going out to a 2-hour dinner with a family of four may cost $100 or more. If you earn $100 in one hour, this may seem like a fair trade, as you’re paying $100 for something that would cost you $200 in time. But if your income is $20 per hour, you’re essentially paying $100 for something that’s worth only $40 in time. That may seem steep for a midweek convenience meal; however, if you’re celebrating your child’s first straight-A report card, it may feel like a fairer trade.
How about a week of vacation? Travel, hotel, and food on the road can add up fast. If you and your partner total up $5,000 in expenses for a beach resort getaway, at $100 an hour, that’s more than a week’s worth of work hours — not a bad deal, you may think. The fact of the matter is this: The decision of whether an activity is worth its cost is completely subjective. That idea is certainly empowering and freeing as long as you make conscious choices about where you dole out your hours.
Staying open to experiences and using time wisely
The process of evaluating your leisure time is meant to help you use your time well, not to limit your experiences. If you’re unsure about a certain activity but you had fun and found it worthwhile in the past, you should probably go again. Also consider going if it’s part of your current or future goals. If you enjoy the people but not an activity, you can suggest a change of venue and make the outing more worthwhile.