Not all uses of time are equal, and this simple truth can make a big difference in life. People who spend their time doing more profitable work make more money. People who spend their time investing in others build better relationships. People who spend their time creating a flexible career enjoy more freedom. People who spend their time working on high-impact projects contribute more to society. Whether you want more wealth, more friendship, more freedom, or more impact, it all comes down to how you spend and value your time.
If you’re like me, you probably want the things listed above, friendship, freedom, impact and others too such as health. But you can’t have everything at once, so you need to understand how to effectively manage the tradeoffs that you face on a day-to-day basis.
The Time vs. Money Dilemma
At some level, we all have an internal gauge for how much our time is worth. On extreme ends of the spectrum, it is easy to know if a task is worth your time. As you move toward the middle of the time-value spectrum, however, it becomes less clear if a particular task is worth your time or not. And this is the problem: most of life is lived in the gray zone of the time-value spectrum.
- Should you buy the nonstop flight and save two hours or get the flight with a stopover and save a few bucks?
- Should you pay your neighborhood teenager to mow your lawn so you have an extra hour free on the weekend?
- Should you spend this week working with a client that will pay you $2,000 right away or working on a business idea that could generate $20,000 over the next year?
We make choices like these everyday, but most people base their decisions on gut feelings or guesswork and never calculate what their time is actually worth. Everyone has an hourly value, but very few people can actually tell you what that number is.
Regardless of how you calculate the value of your time, here are some additional factors I keep in mind when considering the value of time.
Misguided Success – Don’t waste your time becoming successful at the wrong thing. Simply understanding the value of your time is helpful, but you need to know what you want out of life to get the most accurate idea of the value of your time. Too many people chase money or power or approval because everyone around them does the same. What if that’s not what you really want? Sure, you can find ways to increase the value of your time, but what if you’d rather have more free time than more cash? This is where knowing your core values and getting clear about what is most important to you is useful.
Tradeoffs and Opportunistic Addition – Bill Gates has been named the richest person in the world more than a dozen times. In 2015, he ranked number one yet again with an estimated net worth of $72.7 billion. According to one analyst, “With a worth of $72 billion, a 6% rate of return would earn Gates roughly $114.16 per second he is alive, making it a poor investment for Bill Gates to bother picking up a $100 bill if he dropped it.”
Although interesting and quotable, the idea that it isn’t worth it for Gates to bend down and pick up a $100 bill off the ground is incorrect. Why? Because picking up the $100 bill does not prevent Gates from earning $114.16 at the same time. He will be paid whether he picks up the $100 bill or not. In fact, by picking up $100 Gates will earn $214.16 during that particular second instead of his normal $114.16.
Picking up a $100 bill is not a tradeoff that prevents Bill Gates from earning money. It is an opportunistic addition on top of the money he is already earning. Opportunistic Addition refers to choices that would decrease the value of your time if you spent all of your time on them, but increase the value of your time if you do them at opportunistic moments. For example, consider an author who also does speaking engagements. If they spent all of their time speaking, then they would decrease the value of their time because they wouldn’t write any new books, they would gradually become irrelevant and their speaking rate would decrease. However, by doing speaking engagements every now and then—say, once or twice per month—many authors can add thousands of dollars to their bottom line while still having plenty of time to write new books.
Non-Negotiable Free Time – One of the dangers of calculating the value of time is that you end up convincing yourself to work another “productive” hour so that you’ll increase the overall value of your time. Having free hours where I can relax and decompress makes it possible for me to be effective during the working hours that remained. You need to value your free time, downtime, and leisurely activities that provide whole health and wellness to your life.
Should you work another hour? – Wondering if you should work another hour? Here’s a good rule-of-thumb I learned: Consider each hour of your day. 9AM to 10AM, 10AM to 11AM, and so on. On average, do you make net positive or net negative decisions during that hour? For example, if you work late, does the hour between 9PM and 10PM lead to positive outcomes on average? Or does that hour include more mistakes than accomplishments? Does that hour include more procrastination than productivity? If it’s a net negative hour on average, then you should stop working. Working hard on a project is good until the next hour of work burns you out more than it produces something valuable.
Happiness and Meaning – At the end of the day finding happiness and meaning in everything you do is key. Without this, no matter how much you make in that hour, it will eventually leave you feeling empty and unsatisfied.