How valuable is your free time?
How to calculate the value of your free time.
Time is cash. But how much exactly is your time worth? When deciding how to spend your free time, it can be useful to assign a monetary value to assist determine what you’re willing to give up.
Find out the value of your labor hours
The conventional method for calculating the time worth of money is to divide your annual income by the number of hours it took to earn that amount.
According to numerous studies, the average full-time employee works roughly 2,500 hours per year.
Based on these two benchmarks, you can determine the value of your labor hours.
For instance: You have a 300.000 dollar compensation package for one year, thus you can calculate the formula.
300,000 / 2,500 = 120USD.
Therefore, an hour of your time is worth 120USD.
And here is a useful calculation when comparing employment opportunities: If you are considering a contract that pays more than your current position but requires a lengthy period of work, it may not be worthwhile to break it up. to consider.
But this is not how you should view your free time. If you spend an hour at a flea market instead of going to the store in order to save 100USD on an item you intend to purchase, you do not lose 20USD (one hour is worth 120USD and you save 100USD). Recognize that your leisure time is yours to utilize as you like and that you have earned it by working during working hours.
Free time versus working time
Another perspective is to consider what you can do with your time right now. If you are a freelancer, you can work at any time.
In this example, assume that your hourly wage is 200USD. If you spend an hour shopping around to save 120,000 VND on a necessary item, you may pay 120USD more and use that hour to work instead. You will save 80USD relative to the beginning.
The issue with this strategy is that you probably do not wish to work constantly. If you must choose between spending money or doing housework, such as grocery shopping, you may be persuaded to pay a delivery fee to buy yourself an hour of freedom from responsibility.
It does not matter what you wish to do during that time, but rather how much it will cost you to do nothing.
Increase the hourly value
You should evaluate rather than calculate the worth of an hour of free time. For instance, several hours of the day are open for labor (be it paid or unpaid work, such as childcare or household chores). If you are so busy that you only have two hours to yourself, you cannot afford to sacrifice one of those hours.
In this regard, it would be prudent to price your hours differently using a bullish pattern.
In a market where prices are soaring, the greater the demand for an item, the more you must pay for it. In this situation, the demand for your time is extremely high, and any prospective earnings must be weighed against that demand.
In practice, such a model might appear as follows:
- The cost of your labor is calculated by dividing your revenue by the total number of hours you spent earning that income (including commuting time, etc.).
- The cost of a restricted number of “free” hours is the revenue you can earn if you choose to work during that period.
- The cost of your remaining free time depends on how much time it takes away from your family and interests. For instance, if you spend 500USD to sleep an extra hour on Saturday morning, the worth of that extra hour exceeds 500USD.
Using this technique, you may determine how many hours are “free” at the standard rate and
- how many hours are available for surge pricing. This figure could be zero if you have a hectic lifestyle, and your time may be “unbuyable.”
Obviously, financial decisions are dependent not just on spending preferences but also on the amount of available funds. If you cannot afford to have a professional painter paint your home, but you have a few weekends to spare, your options are to paint it yourself or live with peeling paint.
Life is overly complex. Even if you are aware that money and time are involved, you cannot always substitute one for the other at your discretion.
Looking at each hour of the day through the prism of “what can I earn now?” is a surefire way to experience burnout.