People often wonder what their time is worth—usually so they can gauge their salary at their next job. But how do you figure out the worth of your free time? Is time spent cutting coupons to save a few bucks worth the trouble? What did that long wait at the DMV cost you? If you could estimate the value of your time and what you could be doing with your time, you would better prioritize tasks during your day.
How Much Money is the Task Worth?
One way of calculating time value comes from TheSimpleDollar.com. If you’re trying to decide if doing some task is worth your time, calculate how much money that task is worth to you. For example, let’s say that you can make $12 an hour sitting on your back porch writing, but your lawn needs to be mowed. If you can pay the neighbor kid $10 to mow your yard, then it’s worth it – you actually earn $2 by sitting on your porch writing while the neighbor mows the yard. But if your time is worth only $8 an hour, then you’re better off mowing it yourself. When you think in these terms, decisions whether or not to do something become much easier.
What's the Opportunity Cost?
TheSlate.com suggests calculating something called opportunity cost. This is an attempt to measure what opportunities you have lost by the pursuit of a specific action.
Consider grocery shopping. You can order online and have the groceries delivered by a company like FreshDirect or Peapod, or go out and spend two hours wandering the aisles at the local supermarket. There’s a delivery fee for the former, maybe a markup also. In resort towns (The Hamptons, NY; Aspen, Colorado; Miami Beach, Florida), local stores might hike their prices during vacation times. So which is the better way to shop? This opportunity-cost formula makes the decision easy: Is the fee plus markup smaller than the value of two hours of shopping time? If yes, get delivery. If no, get in the car.
If you’re still trying to figure out whether some outsourcing (like food delivery) is worth it, TheSlate.com provides follow-up questions: Would you do this chore for someone else if they paid you the market wage for it? Would you, say, go grocery shopping for your friend if she paid you the delivery fee? If not, you probably shouldn’t be doing it for yourself, either.
Opportunity cost sounds similar to the concept of Cost-Benefit Analysis (CBA), a method that dates back to before 1900. Cost-Benefit Analysis figures out the expected balance of benefits and costs, including foregone alternatives and the status quo. CBA helps predict whether the benefits of a policy outweigh its costs and by how much relative to other alternatives.
Ever Wonder Why You Have to Wait so Long in the Doctor's Office?
There’s one more time quantifier to consider. For most of us, depending on who we are, our opportunity cost will be less than those around us. So, if you are forced to wait for a doctor’s appointment, for example, it’s because it’s more efficient for the doctor’s office if waiting is done by the person with the lower opportunity cost, the patient. This explains why, when you go to the doctor, sometimes there is a long wait for a short visit. This is due to the notion that either the doctor can schedule long appointments and sometimes wait for you, or the doctor can schedule short appointments and sometimes make you wait. Most doctors are higher paid than their patients, and, therefore their opportunity cost is higher. So the patients will always wait.
If you’re generally a bad list maker or you always find yourself misjudging the amount of time it takes to do something, career counselors and life or career coaches can help. They help you prioritize your commitments better to maximize the value of how you spend your time. Also, don't forget there is value in recreational time as well. Even though lying in a hammock reading will not increase your income, it will increase your sanity, and that is definitely worth the opportunity cost.