Advanced Finance, Philosophical Musings

How Much Is Your Time Worth? (Part 1)

“While you’re out mowing your lawn, could you do mine? It’ll only take you an hour.”

Is it worth your time? Simple question, crazy complicated answer. Actually, there are many answers, and many people have tried to find a “best” answer before. None of the answers that I’ve found have satisfied me, mainly because most answers apply the same value to Hour 1 as to Hour 8 as to Hour 50. They’ll take your total earnings, divide by your total working hours, and say, “Voila! An hour of your time is worth X” They’ll say that the hour you spend answering emails at noon is worth the same amount as the hour when your son is playing Little League, and the same as the hour on Saturday night when you should be sleeping or partying or doing whatever you damn well please cuz it’s a Saturday night! If you can’t tell, I dislike this answer. How can a hour of work on a “normal” day have the same value as an hour that keeps you away from your family dinner? I think it’s a bit ridiculous.

So, I give to you, “The Marginal Time Value Philosophy.” In short, the first few hours you work are easy, go fast, and therefore are worth the least. They are also the hours that you need the most; you need to work few hours (at least) to pay the bare bones bills. The need for those early hours—i.e. your demand—means you’d be willing to take a worse deal for them. The last hours you work—when you’ve made all the money you require to pay bills, and all you want to do is live the other parts of your life—are the grueling hours. You don’t need them—your demand is low—and therefore you should charge a higher rate for them!

You might disagree with my baseline argument, and I’m perfectly willing to admit that I might be thinking about this incorrectly. But, I think I can convince that we need to apply different rates to different hours.

  • Would you accept $2000 per week for 20 hours of work? That’s 100K a year, working only 20 hours a week. On average, it’s $100/hour.  
  • Would you accept $15000/week for 150 hours of work? It’s also $100/hour. That’s 750K a year (whoa!), but you’re working 21.4 hours per day. On average, you have 2.5 hours each day for sleep, eating, errands, fun etc. Every single day. Can a human work that much? Is life enjoyable at that point?

If you said yes to the first situation, then you’re admitting that your time can be worth $100/hour on average. But  if you said no to the second situation, then you’re saying, “Eventually, my time is worth way more than $100/hour.”

And that is my argument! The value of your time changes depending on how much time you have left.

Moving on from that hypothetical, I’m going to pose two more hypothetical questions and one real question. I’ll give my answers afterwards if you’re looking for an example of my thought process. The questions are:

  • In extreme circumstances, how many hours a week are you willing to work? These are your negotiable hours. You might not be happy working this long, but everything beyond this limit is non-negotiable. You’ll probably choose a number less than 150 hours per week.
  • How much money do you need in order to meet your bare minimum lifestyle? Cut out whatever fat you think you can, keep whatever expenditures you don’t think you could live without. This is your minimum required salary. (Think net, not gross)
  • What is your actual take-home pay rate? Or, divide your real-life average paycheck by your real-life average number of hours worked.

The answers will be different for everyone. Some people won’t work an hour over 45, while others consider 60 to be normal. Some folks can live off rice and beans and read free books from the library. Others consider fine cuisine and Netflix to be a part of who they are. We all have limits, thresholds, and no-go zones.

Image result for average work week
“Normal” is quite subjective…

My personal answers: 72 hours a week are negotiable  and $2500 a month is my minimum required salary, or $600 per week (again, that net pay, not gross pay). I’d much prefer 40 hours a week, but 72 hours a week is the most extreme I’m willing to go. It’s 12-hour days for 6 days; that leaves a little time for commutes, meals, sleep, an errand here or there on work days. And then one day completely off—relaxation, errands, chores around the house, maybe an adventure with my girlfriend. $600 a week allows me to pay my bills (mainly the mortgage), keep the heat on, eat a reasonable diet, and save for retirement. Done. I wouldn’t be happy working 72-hour weeks for $600, but that would be the extreme scenario in which I could still live my life. Do you have your numbers?

Next week, we’ll dip our toes in the water and use these actual answers to put the idea of Marginal Time Value into action. I’ll show you how my 40th hour of work should be worth 3x more to me than my first hour of work, and that my 60th hour should actually be worth almost 10x my first hour. By thinking about our time in this way, we learn to think about how to actually value our free hours.

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About Jesse Cramer

I’m Jesse. I’m an engineer, a new owner of an old home, and an avid reader/writer. I hope you enjoy my thoughts, numerical breakdowns, and general musings. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@BestInterest_JC) or on Reddit (u/BestInterestDotBlog). Many of my posts have been directly influenced by my readers. It’s the most fun part of writing this blog. And as always, thanks for reading the Best Interest. Jesse
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