What is the Value of Time?
By Steve Gillman
In one sense the value of time cannot be measured. After all,
your time in this life is the one thing that makes all other
things of value possible. But is is also true that you must trade
your time for things of value. This is what you do when you go
to work to pay the bills. You trade five hours of time working
for a month's worth of electricity, for example (unless you use
very little electricity or make a lot of money per hour at work.
Why is it important to measure your time according to the
money you can earn with it? Here is one reason: If you can work
an extra hour and make enough to pay somebody for some task that
would have taken you two hours to do, you just freed up an hour
to spend with your kids, read a good book or do whatever is of
value to you. The following excerpt from my ebook, Money
Saving Secrets will make this a bit clearer.
Know the Value of Your Time
In the end, time is the ultimate limit to what you can do
in this world. In that sense, your time is your most valuable
asset. However, to make that idea meaningful when it comes to
anything involving money, you have to understand the dollar value
of your time. Knowing what your time is worth lets you make the
right economic decisions.
For example, a few years ago my wife and I went to South America
for six weeks. We lived in Michigan at the time, and the tickets
were fairly expensive when we checked. However, by playing around
with the online ticket sites we noticed that they were very cheap
if we left from Miami.
We realized that we could take a bus to Miami, pay for a taxi
ride to the airport, and return the same way, for a savings of
about $400. I should mention that I could take time from whatever
jobs I had as needed, and we considered a two-day bus ride more
of an adventure than an ordeal.
How do you make a decision like this? We chose the bus, by
the way, and the whole six-week trip cost us a total of $2,200
for everything (and only that much because we had $200 stolen).
My reasoning went like this: it cost 3 days extra time, and at
that time, I couldn't make more than about $300 in that amount
of time, so it made sense to trade the time for a $400 savings.
Today, we wouldn't even consider doing it again. Our standards
of comfort have changed, but more importantly, I can make more
than $400 if I sit at my computer here and work on the next project
for three days. The point is that your time has value, and you
have to consider that when making decisions about saving money.
If you make $25 per hour at work, should you spend an hour
to mow your lawn, just to save the $15 that a neighborhood kid
charges for the job? Not unless you really enjoy hard labor.
It would make more sense to stay at work for an extra hour if
you can. You'll be $10 further ahead AND have the lawn mowed.
On the other hand, if you work for $10 per hour, and you can
fix your broken toilet yourself in two hours, why pay $65 for
a plumber? You'd even be better off taking off from work early
to get the repairs done.
Some more examples:
- If you make $100,000 per year, you should never waste time
- If you make minimum wage, you should probably take grocery
bags to the store for the 5-cent credit they give you.
- If you make millions per year, you probably shouldn't take
the time to save money on anything that cost less than $100.
- If you are homeless, you should go to Sam's Club on free
This is an easy principle to understand, but how often do we
think this way consistently? What is your time worth? Put a number
Suppose you just got your auto insurance bill. Should just
pay it, or should you spend an hour and a half to call different
insurance companies in order to find a less expensive policy?
First answer two questions.
1. How much money can you normally produce with that time?
2. How much are you likely to save by doing this?
If the answer to number 1 is higher than number 2, just pay
the bill and forget about it.
Of course you have to guess at these things. You can't always
know beforehand how much you will save. The point isn't to waste
even more time analyzing everything to death. The point is to
understand and apply the principle involved. Once you consciously
think this way for a while, you will develop an intuitive grasp
of when - and when not - to trade time for money savings.
Am I am telling you not to use everything that you read in
this book? Exactly. Use what works for you. Saving money is not
an end in itself. When it serves the purpose of bettering your
life, do it. Otherwise, why bother? The value of time is a personal
matter and a personal decision.