Episode Summary:
In this episode, we share ideas for putting a dollar value on your time and using that to decide what to buy vs. make, do yourself vs. hire, or purchase new vs. keep using. Of course, everyone is different and everyone’s time has a different value, but we can all begin to evaluate the decisions within a similar framework. We share a few key myths, give real-world examples, and talk through how we value our time.
Episode Notes:
Putting a dollar value on your time is a challenging task, but not for the reasons you may think. It’s not black and white and can vary dramatically by the situation, but we can all go through the same thought process to help us make good decisions with our time.
As listeners of the show will know, we both value our time as a very precious resource, but you may be surprised to learn what time we’ll give up and what time we won’t.
Let’s first start with some time myths:
Myth: I have no free time.
Why it’s wrong: For most people, your schedules are what you make of them for most people. You may currently be stretched too thin, but it’s all within your control. You are as busy as you let the world make you to a large degree.
Myth: I make $100/hr, so anything that costs me less than that I should pay for
Why it’s wrong: You’re not working every second of the day, and not every hour you work directly translates to money. Your annual salary might work out to be $100/hr, but you’re getting that regardless of if you mow the lawn on Sunday morning or not.
Myth: It saves me time to have someone else do it.
Why it’s wrong: True, if someone cleans your house, you save time, but not all the time. You need to seek out and hire that person; you need to schedule with them, answer questions, pay them, inspect their work, and deal with their issues. So you don’t save two hours of cleaning; you save one hour of real-time and spend the other hour managing the process.
Myth: All time is created equal.
Why it’s wrong: Your energy shifts throughout the day and some people have more energy in the morning versus at night. Not all time is created equal, so there’s value in recognizing when you have more energy and leveraging that and appreciating when you have less energy and expecting less productivity in those periods. If you try to spend all of your time in a hyper-productive mode you will burn out.
Questions to ask yourself to evaluate spending decisions based on the value of your time:
- Could I be incrementally making money with the time? If so, how much?
- How much time would it take me to set it up and manage the work someone else is doing?
- How much do I dislike the task?
- What else could I be doing with that specific time?
- Could I move this task to a different time of the day or week that works better?
- Would the quality of my work have an adverse outcome?
- Are there safety or legal concerns?
- Would I learn a new skill, improve a skill or challenge myself?
- What’s the cost difference?
- Where is your money spent going, and is it to a good cause or someone else trying to support themselves?
- The cost is the last question, and when you’ve answered those, you can ask yourself, is this specific scenario worth that specific dollar amount?
Let’s talk through some real examples:
- Hiring someone to clean your house every other week for 2 hours.
- Taking a 2-stop 25-hour flight vs. a 1-stop 10-hour flight.
- Doing your own yard work every other week for 2 hours.
- Doing your own taxes once a year for 5 hours.
Top 3 takeaways:
- Your time is valuable, but that doesn’t mean you always need to pay someone for it back.
- You don’t always save as much time as you think you do by outsourcing.
- There’s no formula for putting a dollar value on your time. Still, if you evaluate each scenario independently, you will identify what you are willing to spend to buy it back over time.