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Time and money are finite resources. They're reasonably easy to convert from one to the other. Some people value one more than the other. Some circumstances may warrant valuing one more than the other.

However, taking this into account, how do you work out what your time is worth? Is it possible to put this into a rational formula or is it all irrational and emotional? Say, you know a petrol station 15 minutes away where the price is cheaper and will save you $5. In this case, driving is worth $20 per hour to do the drive. Do you do the drive? Why or why not? Can you explain your decision in a rational manner?

Some people go "okay, well I get paid x per hour and that's how much my time is worth". So in the petrol example, if the person got paid more than $20 an hour, it would not be worth their while to drive the extra distance.

But there's many flaws with this logic. Firstly, it implies that time and money are completely transferable. That's not true. Unless the opportunity cost of the drive is literally you would be late for work, that 15 minutes is probably not going to be used to create $20 worth of utility. Most of us with an extra 15 minutes would probably just waste it.

The other thing is it makes our time incredibly valuable. Watching a movie costs like $40 - for someone on minimum wage. That's not including travel and ticket costs. You wouldn't expect many people on minimum wage wanting to pay $40 to see a movie. That to me seems like looking at their hourly wage isn't how most people value their time.

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    "petrol station 15 minutes away where the price is cheaper and will save you $5." That requires a 40 cent/gallon price differential. – RonJohn Sep 29 at 23:02
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    It's not "all irrational and emotional", but you really need to put some thought into it. Some people drive across town to save 40 cents on a whole tank of gas, or a dollar on a gallon of milk. To me, that's highly irrational, but it serves some need in their brains. It is, though, worth it for me to spend $10 on grocery delivery (if I have a lot to buy). In the end, it's your own opinion, so the Q might get closed as Primarily Opinion Based. – RonJohn Sep 29 at 23:08
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    "that 15 minutes is probably not going to be used to create $20 worth of utility" -- you mean $5 worth of utility, right? Also, where is $20/hr "minimum wage" (I assume you estimated $40 for a 2-hour movie)? – nanoman Sep 30 at 0:49
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    @RonJohn: You can't compute the price differential unless you know the size of the gas tank. With my Honda Insight a fillup is a bit over 9 gallons, so I'd need a 56 cent/gal price difference to save $5. But my friend's pickup takes about 45 gallons, so only an 11 cent/gal difference is needed. (Of course, the truck will probably burn close to $5 worth of gas on that 15 minute drive :-() – jamesqf Sep 30 at 4:39
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    @RonJohn At a point not so long ago, gas prices at the gas station in my home town were €1.70 per litre, while a gas station that was a 15 minute drive was €1.20 per litre. That's a difference of €0.50 per litre or about €1.90 per gallon. Reason for the difference: gas gets taxed differently in different countries. Even with my 45 litre tank, it was a good €20 difference. – Belle-Sophie Sep 30 at 7:40

15 Answers 15

80

You can easily estimate the value of your own leisure time. Just ask yourself how much you'd need to make per hour in order to take a second job :-)

PS: On further thought, though, I realize that it's more complicated than that, because the value of money to me isn't fixed. That is, the first $X that pays for food &c is pretty darned important, the $Y that pays the mortgage &c is a bit less valuable, while the $Z that I would just stick in the bank isn't all that important - especially if I'm too busy working to spend it :-)

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    Nice, that cuts neatly through a lot of philosophical baggage. I'd add for the sake of completeness how much you'd be willing to pay for more of it (spent on hiring e.g. cleaning service, lawn service, laundry service, grocery delivery). – Jared Smith Sep 30 at 13:04
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    @JaredSmith you could also ask yourself: If your Boss would offer you to reduce your hours and forfeit some pay, how much would you lower your income for X hours more free time? – Falco Sep 30 at 14:00
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    It also isn't this simple because it depends how pleasant the second job is. If it's indistinguishable from my current unpaid hobby, I would do it for $1/hr. – nanoman Sep 30 at 18:28
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    Great point about the non-fixed value of time/money. If I only have 1 free hour a week, you'd have to pay me an awful lot to work instead, but I'd do it for low pay if I'm retired and have 168 hours of free time each week. Similar to the rationale for why overtime typically gets paid at a multiplier like 1.5x - an "hour of work" doesn't exist in a vacuum, it becomes more and more costly as the total working time passes some threshold. – Nuclear Wang Sep 30 at 18:55
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    FYI the name for the phenomenon that the first $100000 you have has much more value than the second $100000 is the law of diminishing marginal utility. We can even measure the decrease in marginal utility across products. Your fourth hundred thousand dollars in the bank is still worth rather a lot compared to the third, but an offer of four hamburgers for dinner tonight instead of three indicates that the fourth hamburger, for most people, has zero marginal utility. You wouldn't spend more for that fourth burger. – Eric Lippert Oct 1 at 19:32
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In one sense, we cannot really gain or lose time by converting with money. We all have 24 hours per day and no amount of money can change that. It's all about how we use our time. And, rarely is time completely wasted. We have a wide variety of human needs and wants. A balanced life involves many things that have no immediate connection to money, such as sleep, exercise, relaxation, intellectual stimulation, and relationships with family and friends.

Extra time spent driving is not pure waste if we are reflecting on our priorities, listening to educational audio, or chatting with our kids -- things we'd want to do sometime anyway. Extra time spent walking is not pure waste if we benefit from the exercise. Extra time spent doing a home repair job rather than hiring someone is not pure waste if we are learning a useful skill and gaining self-confidence.

The effective cost of spending an hour on something is typically lower than a naive estimate, because of these factors -- essentially, the hour is going to be spent somehow, and humans are meant to be active, physically and mentally.

A job's hourly wage is not a good indicator of marginal value of time because, for one thing, most jobs do not have completely flexible hours/workload at the worker's discretion. An exception would be a contractor/freelancer job.

And if I do have the choice of working a hour less or more at a job at a given wage, the value of time depends a lot on how much I enjoy the job. If I hate the job and work it only because starvation is worse, the value of my leisure time is low. Almost any activity where I could earn something without suffering, or take steps toward getting a job I'd enjoy more, is worthwhile. If I love my job, the value of my leisure time is high. The job meets so many of my human needs that it's difficult to justify taking unpaid time away from it.

The ultimate purpose of earning and saving money is to cover current and future survival needs and then allow us to spend our time in the ways that bring us the most fulfillment.

Lastly, while 24 hours per day is a known constant, how many days we have is not. When it comes to decisions that can statistically lengthen or shorten our (healthy) lifespan, the stakes are higher. Time lost to an early death is the ultimate waste. So much of what fulfills us comes gratis along with those 24 hours per day (as the saying goes, the best things in life are free).

The value of clawing back days that would otherwise be spent in nothingness, or severe incapacitation, is very high. Though people may underestimate this when the marginal days are in the distant future, the value becomes overwhelmingly visible when the end is near. But even so, a person will not necessarily pay everything they have; especially for an older person looking back with satisfaction on a life well lived, the decision may be that the money would do more good in the hands of their loved ones.

EDIT: To clarify about hating or loving a job (let's say a $30/hr job), keep in mind that the hours worked are assumed to be flexible in that discussion. If my job is hell, then I'm working the bare minimum of hours on which I can survive, and will jump at the chance to do anything remotely profitable with the rest of my time; saving or earning $10, even if it takes one or a few hours, is worthwhile to avoid 20 minutes of hell (as Falco notes). If I really love my job, I'm working as many hours as possible until I'm cutting into essential activities such as sleep, so my leisure time is scarce and valuable; e.g., I might pay more than $30/hr to shorten my commute. Another way to look at it is in terms of psychic income.

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    I either disagree or misunderstand. If I hate my job, I would say the value of my free time is high, not low (because I need the free time to keep myself sane), whereas if I love my job, the value of my free time is low, not high (because I'm less worried about having less free time if I enjoy my work anyway). Or am I misunderstanding? – Flater Sep 30 at 11:37
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    @Flater yeah, I also either disagree or misunderstand. I tried to work through the logic of exchanging an hour at work for an hour of leisure time (or vice versa) but I couldn't quite figure it out. – David Z Sep 30 at 11:56
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    Agree with you, @Flater. If my boss asked me to come in on a Saturday for a job I hated, I would ensure that I got paid well to give up my leisure time. It's not so much that leisure time itself becomes more or less valuable depending on your job, it's the relative value of leisure time to non-leisure time. A job you love isn't much like "work" at all, a job you hate means there is a big difference between work and leisure which you ideally should be compensated for. – Nuclear Wang Sep 30 at 12:48
  • The value of the free time in nanoman's answer is higher because it could easily be switched with work time. If you won't, in any case, work past your usual hours, then your free time is always "valueless" in term of money that you could have made during that same time. On the other hand, if you love your job and have no problem doing a few OT, then doing something else could be considered a loss of money. – Echox Sep 30 at 13:55
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    @Flater The Idea was the following: If you hate your job, but you can reduce hours as much as you want, you would try to earn a living with anything else that is not as horrible as your job. So if I offer you to clean my garden at 10$ an hour, you will probably take it, because it means you need to spend 20mins less at your horrible job. - If you love your job, you do not need my 10$ as much, because there is no real reason to reduce your working hours - so I will have to pay you a lot more, to persuade you to spend an hour in my garden instead of your wonderful work place. – Falco Sep 30 at 13:56
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Your/mine/everyone's time is monetarily worth nothing, period.

However, the actions which you perform during your time can have a calculated value.

If our time had a concrete value then volunteer work wouldn't exist and you would never do anything for yourself but rather everyone would be doing everything for everyone.

Would you say that a top athlete who visits children's hospitals for free should also be paid nothing on the field?

We spend our time, 24 hours in one day, how we choose and if we make money during that time then that is coincidental.

Technically your leisure time is worth whatever hourly rate someone is willing to pay you and one which you are willing to accept. Supply and demand is honestly the only answer and most things have a market rate.

If you wish to get $75/hour in exchange for your leisure time but no one is willing to pay that much then your leisure time is worth $0.

I am willing to bet that your time has a different value if you were to start living in another city or country.

Being present for your job is a special twilight zone which gives you a set amount of money even if you are not working 100% of the time.


If you seriously chose to drive 15 minutes to save $5 in gas then you did not "earn" $20/hour. It costs an average of $0.60 per mile to drive the average sedan.

So a 15 minute drive at ~40 mp/h is 10 miles.

10 miles * $0.60 = $6.00

It costed you $6.00 to save $5 in gas so you spent $1.00 and your time for this feeble "savings". This is a just a one-way calculation so assuming you have to get back to where your started then you've spent $7 which is $14/hour; wow you must be quite wealthy to spend extra money on gas for no reason.


I often get quoted to have my brake pads replaced after a car inspection for a cool $400; these are usually bottom-of-barrel quality too.

I can buy a complete set of premium pads for about $150 and it takes me about 1 hour per tire so according to my calculation:

( $400 - $150 ) / 4 hours = $62.50/hour

I've "earned" $250 (tax free!) because I did not spend it.

In order for it to be worth it for the shop to do my brakes I would need to find something to do which pays $62.50/hour for 4 hours. Preferably it would pay me while I wait in the waiting room as well or else I need to calculate how much it costs my buddy to pick me up and drop me off to my $62.50/hour activity.

In both cases I don't get to relax for those 4 hours so preferably I should find something which pays $125/hour so that I can have 2 hours of perceived leisure. Odds are high that the shop can do my brakes in 2 hours or less so I definitely need to make $125/hour to recoup the differential of doing it myself.

You can argue that the proper tools cost money but a single brake job will pay for all of those tools and all subsequent brake jobs will just be gravy.

For the record, I certainly earn less than $62.50/hour in my current position.

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    Wow, I am so happy to have my car, ceramic pads are $35 and rotors are sub-$20/ea, and I can swap them in 20 minutes. Also my rears are original and don't seem to significantly wear. Yes, the PitA of taking the car into the shop is a big part of why I do my own repairs. – Harper - Reinstate Monica Sep 30 at 17:36
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    I used to have a car with less expensive rotors and pads but my current vehicle is the premium model and has heavier duty brake components. My time calculation includes bringing up all of my tools and floor jack from my basement. I'm not saying you have one but if I had a garage and/or lift then I could cut my time significantly. Honestly, even my 4 hour estimation is a bit on the "nothing is going my way" time estimate. – MonkeyZeus Sep 30 at 17:46
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    Yeah, I forget how tedious that is. Now I use one of those wagon-style carts to store my jack, stands and tools, best thing I ever bought, but it won't climb stairs. And yes, premium = low production run = $$$. And oh, I do remember the rust and how it turned every easy job hard. My car got a dose of road salt last year and that's starting to happen. It is awfully nice being able to "throw parts at problems because they're not expensive" eh? – Harper - Reinstate Monica Sep 30 at 18:04
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    @MonkeyZeus, "I would need to find something to do which pays $62.50/hour for 4 hours" Don't forget taxes! $1 saved can be worth more than $2 earned. – Charles Fox Oct 1 at 15:22
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    @CharlesFox The accuracy of your statement makes me sad, have my upvote :'-( – MonkeyZeus Oct 1 at 15:29
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You can never know the unambiguous value of time because no liquid market exists where it is traded as a commodity. The best you can do is estimate. Given this, we can discuss the relative accuracy of different estimates and discuss how they can be improved.

Simply taking your annual wage, dividing by 2000 and getting an "hourly value" is a very rough, order of magnitude estimate. Most people cannot actually show up at their boss's house at 4 pm on a Sunday and declare they would rather spend 15 billable minutes working than drive to the gas station. Even for independent workers, clients may not be available to do business outside business hours. There are two exceptions:

  • Contract-based work where one has substantial freedom in deciding when to actually complete the work. For example, a software engineer employed on an hourly basis may choose to spend Sunday afternoon working instead of driving to the gas station, which will allow him to deliver ahead of the deadline. He will then complete the contract earlier than expected, and will be able to take a new contract sooner, resulting in higher income. This is only possible if you can choose your hours and you are not already working as much as you can physically handle (few people can work every waking hour).
  • On-demand hiring such as Uber or TaskRabbit. In this case however, it is worth considering that the market rate of your hour is not stable with respect to time of day, time of week and so on. So the calculation becomes complicated.

I think generally the idea is that you will have f hours of free time, c hours of chores and l hours of leisure activities. If c+l>f, then at some point you will have to increase f by reducing work time (whether by unpaid leave, or being forced to switch to a less demanding job with lower pay). The lost income from increasing f is balanced against the money saved via c. This is a fair approach to accounting when you have very illiquid time, but it only works if you stick to a policy consistently over the long term. If you calculate the value of your time in a frivolous or ad-hoc manner while also being employed on a schedule, the result is probably that you will not be actually using your time or money in a rational way.

5

Don't put a money value on leisure time at all. You work to get money, the time is a write off, the money is the focus. When you finish work, leisure is the focus, money should be the write off.

If you measure time as money, then in theory you cannot spend nothing. Going to the movies costs you 40 bucks that will require X hrs to replace. As many do not like the drudgery of work, they want to work as least as possible. Going to the movies will require you to work extra to make up the money loss. Money will automatically become more important than time.

Instead leisure time should be considered infinitely more valuable than money, so you spend the lowly money, to enhance any time you have at play.

Even if you just want to watch a movie at home for 2hr, it is fine. You WANT to do it, so that is more valuable than the potential money you could have earned at work. Sometimes we need this, but just want it. How much money is our health worth?

This all has to be part of a balanced lifestyle of course, no one can play all the time and not work.

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    So how do you decide if you should take a 2nd job or work an extra gig to give up free time for money? – Eric Johnson Sep 30 at 11:02
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    Dunno why this answer was downvoted, I think this one addresses the part on "Is it all irrational, can you explain rationally", by saying, the issue may not be a fit candidate for rationality, which is an approach too. – Whirl Mind Sep 30 at 11:24
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    Was once asked "do you work to live or do you live to work'. My answer would be, what do you need the money for? Is it going to result in you enjoying life more will the benefit/fun out weight the time cost? Everyone is different here, some will require more money to enjoy like than others so need to work more, whilst others may need less. Each individual should know themselves and what they need and work with that – Chris Sep 30 at 12:37
  • @WhirlMind - few downvoters will say why. And, in my opinion, when they do, it turns into a series of comments that often need moderator attention. FWIW I just read this answer, and gave it my up vote. – JTP - Apologise to Monica Sep 30 at 17:08
4

The question focuses on a personal philosophy rather than something objectively and universally correct. It's akin to pondering the meaning of (a timed chunk of) your life.

But I do want to raise some counterpoints here. I can't give you a universally correct answer, but I do want to show you other ways of looking at it, because your stance seems to heavily depend on your personal outlook.

For the answer's sake, I just want to define two concepts:

  • Work - Something you get (reasonably) paid to do, but don't necessarily like doing.
  • Fun/free time - Something you like doing and would (reasonably) pay to do (but not necessarily so)

Obviously, this distinction is going to be mentioned a lot.


Is it possible to put this into a rational formula or is it all irrational and emotional?

I wouldn't call it irrational, but it is personal and not objective.

Some people derive happiness from working/being efficient and therefore are able to work without needing to have fun to offset it. Other people don't like their job and thus need to also have fun to balance their life.

These two kinds of people will have a dramatically different attitude towards the value of personal time and what they are willing to spend to improve its quality.


However, taking this into account, how do you work out what your time is worth? [..] Can you explain your decision in a rational manner?

As an example, I can explain one of my rationales. When I buy a videogame (or any similar entertainment for that matter), I have agreed with myself that if I end up spending €1/hour or less, then I didn't make a bad financial decision.
This isn't a hard and fast rule (I've knowingly spent more for once-in-a-lifetime occasions), but it is something I use as a guideline when I'm contemplating spending on something that I'm not yet sure how much I'll enjoy it, or whether I'll regret spending that much money on it.

Why did I come to that number? I did the math. It was based on my income (after taxes and bills), free time, and savings plan. I factored in other costs (such as hardware costs) and figured out that at this rate, I would be having fun and accruing money faster than I'd spend, it so it's a net positive.

Now, five years down the line, I make more money, and I have less free time than I used to (such is life). Therefore, I can now afford to raise that limit to €3-5/hour, depending on how much free time I have.

In other words, the upper limit on cost/quality of my free time is directly correlated to my financial situation after unavoidables (taxes, bills, enforced savings).


Some people go "okay, well I get paid x per hour and that's how much my time is worth".

This is a very basic approximation. It's not wrong, but it is quite simplistic.

For one, if you're in a salaried position where overtime is not paid, this logic does not apply. You can't just spend X dollars on convenience and then use the won time to work extra and gain >X dollars.

The approximation is only relevant when you can work overtime at will, don't mind sacrificing some of your free time to your job, and when you also factor in any additional free time you will need to balance out the overtime you did.

Note: As a real life example, my FIL is able to work paid overtime pretty much at will, and this is exactly how he justifies making personal purchases that don't fit in his household budget.


But there's many flaws with this logic. Firstly, it implies that time and money are completely transferable. That's not true. Unless the opportunity cost of the drive is literally you would be late for work, that 15 minutes is probably not going to be used to create $20 worth of utility. Most of us with an extra 15 minutes would probably just waste it.

The underlying tone here seems to be that you are only valuing financial gains, and not emotional/recuperative gains from "wasting time". That is a very narrow perspective.

"Wasting time" may not net you any money, but that doesn't mean it's a waste of time. "Wasting time" implies that there was something better you could've done but needlessly avoided doing. If that's how you genuinely feel, sure, maybe go do something that doesn't feel like a waste of time.
But beware of the consequences of not letting yourself catch a break once in a while. When you overapply this and push yourself beyond your limits, it's going to have adverse effects.


The other thing is it makes our time incredibly valuable. Watching a movie costs like $40 - for someone on minimum wage. That's not including travel and ticket costs.

This argument again assumes that any free time is the needless avoidance of work time, which is a (in my opinion ridiculous) baseline. All work and no play makes Jack a dull boy, at least in my opinion.

Your statement is only correct if you genuinely think that the baseline of human life is to work every waking moment spent on non-essentials (such as eating or other bodily requirements).

And you may be right for some people. I personally know some people who can happily keep working all day with no need for free time. Seeing posts on SE also introduces me to other cultures where this pro-work attitude is still prevalent.

But, on the other side, every single one of these people I personally know (at least the ones I've known for more than a decade) has ended up with a severe long-term burnout because they overexerted themselves.

I'm not going to label anything as good or bad (it's a pointless discussion) but it is important to live your life sustainably, which means you need to avoid overexertion over extended periods.


Example calculation

Before you can decide on how much you spend on convenience/free time, you must first decide on your priorities. This is personal. A basic example of priorities would be:

  1. Food
  2. Housing
  3. Family
  4. Saving up to $250/month
  5. Quality of life (free time, entertainment, luxury foods, activities, ...)
  6. Remaining savings

This is just a basic example. Do note that all bullet points inherently imply cost vs quality considerations. E.g. you wouldn't pay $1000 for an apple, even if food is your main priority.

After the priorities are decided, the math becomes relatively simple.

  • Take your income
  • Subtract all priorities higher than free time.
  • Take an average cost into account for all things that are not fixed (e.g. groceries).

As a demo calculation:

$2500 monthly income
   - $600 groceries
   - $900 rent+bills
   - $300 family/child care
   - $250 savings
= $450 left

So you have a $450 "party fund".

Next, you need to consider how much time in a month you have to spend on leisure. Let's say that after the essentials (work, cooking, family care, ...) you average 3 free hours per day = 90 free hours per month.

You quickly realize that if you consistently drain your party fund during those 90 hours, you will average a spending of $5/hour or less.

Note that you or course don't have to spend it all, but because you already subtracted the minimum savings you want to keep each month, you have effectively agreed with yourself that you're allowed to spend the entire party fund if you have a valid reason to do so.

If you are able to fill your quality time at a lower cost (e.g. spending only $300 on free time in a month), and you find yourself wishing for more free time, then you can start evaluating whether spending $20 to convert two hours of busy time into free time is worth it to you.
I can't make that decision for you. But you can do the math yourself, based on your priorities and your evaluation of what benefit you derive from the convenience you pay for.

To summarize the most important points:

  • If you can work overtime at will, and you love your job enough to not need to offset it with leisure time, and the convenience costs less than you can earn while working the same amount of time that the convenience saves you, then it makes sense to pay for the convenience and do your (financially more efficient) work instead.
  • If you don't love your job and require X free time to balance your life after having worked Y hours, then you need to take this into account whenever you decide to work more. If you're considering working more to get some extra spending money, you need to count this as needing to invest X+Y (work + balanced free) time into it, not just work time.
  • If you wish to have more free time, and have excess funds in your "party fund", then you can evaluate whether the financial cost of a convenience (which nets you a given amount of extra free time) is worth it to you. This is a quality vs quantity argument for your free time.

Disclaimer

These are all just simplified examples to show you the variety of approaches/outlooks you can have on your work/personal life. Everyone's life is different, everyone has their own experiences, and everyone will have to adapt this philosophy to what matters to them.

  • "if you're in a salaried position where overtime is not paid, this logic does not apply". I disagree. You can request unpaid vacation days, so you will literally lose money if you choose to have more free time. – Shikkou Oct 1 at 15:15
  • @Shikkou: The question is about paying for convenience i.e. spending more money, and rating the value based on your hourly rate, which equates to the amount of free time you'd be giving up to instead work so you earn back the convenience cost. Salaried positions can't do more hours to earn more to offset the cost of the convenience they paid for. The logic for salaried employees would not be based on your hourly wage (as you have no real hourly wage). Taking time off does nothing to help pay the convenience cost. – Flater Oct 1 at 16:06
3

The question is interesting, but not likely to be answered the same by any 2 people. Which really makes it "opinion-based."

First, to address the examples you offered -

If gas is 15 minutes away, that's 30 minutes round trip, and $10 worth of "time" wasted. Either way, you offer the premise that people look at their wage, performing such calculations, and then act in a way you find faulty. The truth is that most people don't perform these calculations at all.

I don't know why you think movies cost $40. The current US minimum wage is $7.25. Just about 2 min-wage hours. People making a minimum wage still go out to eat, fast food more than higher end restaurants, still have leisure activities, etc. It just costs them more in term of hours they need to work to pay for it.

Part of the issue is that one can't easily command the same wage for the next X hours, not when they are working for an employer. A self-employed or freelancer might be different. Years ago, I had an internet acquaintance who was in high tech, making about $80K. His wife was home with the baby, but they had debt they both wanted to get rid of. Friday and Saturday night he delivered pizza, and blogged about his experience. Even though he made $40/hr at his day job, he was happy making $25-$30/hr 2 nights a week. This was nearly $800/mo that went right to the credit card bills.

Another time/money anecdote - I knew a manager at a successful mutual fund. ('Knew' as in he was a friend of a friend, and a few times we'd get an invite to his holiday party). I ran into him at Costco, returning a $19 pencil sharpener. The year prior, he made $4.2 million dollars. Even with the insane hours he worked, that's still over $1000/hr. I think about what the thought process was that kept him from tossing it in the trash if he didn't like it. Maybe he just wanted to run an errand and feel 'normal'.

When my daughter was a toddler I made her a rocking horse. I tracked my time, just over 48 hours. Trying to equate the purchase price of a store bought item vs valuing my time didn't make sense, as I wasn't doing woodwork for pay, it was a hobby, to do something different from my day job, and relax. Similarly, I finished my basement, pretty much on my own. It wasn't to save money, but for the pride of doing the work myself. Hearing my daughter tell someone "My dad built me a dance studio" (one of the rooms there) is priceless.

There are academics who study such topics, and use terms such as 'marginal utility'. If an hourly worker were able to command the same wage per hour, they don't tend towards the 100 hour week, as they start to value their leisure time even more. The move towards Doordash, Uber-Eats, and the free next day Amazon deliveries goes toward your general point, that people would prefer to pay (in the case of food delivery) to buy back some leisure time.

  • Which really makes it "opinion-based." Then why not vote to close as such? I'm really surprised that this question has survived closure and has so many upvotes. – user71981 Oct 1 at 11:13
3

To assess the value of (potential) leisure time, you have to make specific comparisons between your options. It's not just "have constant fun doing whatever you want" versus "complete waste of your life". If I take on a secondary job that I happen to really like, I'm giving up a lot of leisure time, but the effective cost of that 'lost' time is low because I'm still enjoying my life while I'm working.

The specific case of people making apparently irrational decisions to save money (such as travelling half an hour to buy milk for $1 instead of $3) probably isn't as crazy as it sounds. (1) Maybe I feel like I'd enjoy the trip, or at least not mind it much. I can listen to a podcast on the way. Is that so much worse than binge-watching TV at home? (2) If we all refuse to buy the $3 milk, they might lower their prices to more reasonable levels. If we all just buy the $3 milk because it's convenient, maybe they'll raise the prices to $4 to see what they can get away with.

  • +1 for the podcast. The time zeros out as it's not different from me sitting at home listening to the same podcast. The cost is really the gas and wear on the car. (and welcome to Money.SE) – JTP - Apologise to Monica Sep 30 at 14:02
  • In addition to the cost of gas and wear, there is the cost of the risk of an accident during the drive, both the financial cost and the cost to your health. Considering the dangers of traffic, this cost is not negligible. – gerrit Oct 1 at 10:57
2

However, taking this into account, how do you work out what your time is worth?

$0. Your time has no value.

Your employer isn't paying for your time it's paying for a task. An artisan making leather goods alone is being paid for goods produced, not time. No one cares how long it took you to make that wallet the wallet is priced to the market for wallets. Taking on an employee is about decreasing your profit per unit in order to to increase total output, again, your time isn't the valuable piece of the equation.

All of these rationalizations that "I can work an extra 30 minutes if I pay someone else to pick up my lunch" is not about the value of your time, it's about the value of avoidance of a chore. You can also work an extra 30 minutes and have brought a sandwich from home. Or work an extra 30 minutes and just be a little hungrier later. Or go pick up your lunch and work an extra 30 minutes later.

How you value leisure time is about how valuable leisure is to you and how much leisure you can afford. It has absolutely nothing to do with what someone else would pay you for some task.

Don't get in to this trap of rationalizing luxury spending because of the tremendous value of your time. How much you're willing to pay someone else to do your laundry has everything to do with the amount of money in your wallet and nothing to do with how much someone else will pay you to do some other task.

  • 1
    This is true for goods, but for some paid services, the customer is paying for the time as well as the services provided. A taxi ride may cost more if the taxi gets stuck in traffic (unlike a bus ride, the passengers are not directly paying any applicable overtime), a personal guide quotes their rates in money per hour or day, companionship and "companionship" costs factor in time, and there are other examples, in particular for cases where the seller / service provider is paid to spend a certain amount of time with the customer (while providing their service). – gerrit Oct 1 at 11:02
  • Just because things are priced in terms of time does not make the time valuable. This is particularly true of non-productive time, like leisure. No one cares about your time. – quid Oct 1 at 15:23
1

There is no single number.

If I can outsource an hour of chore A for $40 and an hour of chore B for $50, I might choose to outsource B despite being more expensive. I might dislike doing B more than I dislike doing A.

Similarly, I would pay more to save an hour of waiting in line while on vacation than while at home. While on vacation, the hour in line costs me an hour of opportunity to see attractions I may not have another opportunity to see.

0

What exchanging time/money means

You can not rally buy or lose current time, the only way to change the overall amount of time you have is by changing your life-expectancy. So what we usually mean when talking about exchanging money for time, is what we do with the time we have.

So when comparing an amount of money with an amount of time, you always have to put something else on the other side what you could be doing instead. So driving 15min for 5$ has to be compared to something you could do with these 15min instead. So I could compare it to 15min more sleep tonight and how much this improves my life quality instead of sitting 15min in the car. So it really depends on how much I enjoy driving around and how much I need 15min more sleep. Since this direct comparison is hard to gauge, we can use some common scales.

Hourly wage vs. free time

The comparison for money saved to your hourly wage (after taxes) is not a bad one. Even if most of us can not freely change their weekly hours, most of us could in principle search for a job with less hours for less pay, or put in some overtime for more money. In principle you could ask yourself - how much would a company have to pay you to drive around and fill up cars for them per hour, for you to take it as a second job? If your answer is 20$ or less, you should take the detour and save 5$ by driving 15min.

This also serves as a good estimate for increasing your free time, by buying services or hiring help. If you can save a 30min drive for shopping groceries by ordering delivery. If you could just put in 30min overtime instead of driving to the mall and both tasks are equally exhausting for you, you can just calculate if 30min overtime pay you more than you pay for the delivery. If you despise driving and love your job, you will probably much rather do overtime and order the delivery, even if it is more expensive. So it always depends on your preference for doing one thing vs. the other.

Limits and bounds in utility

All this holds only within certain bounds. There is a minimum amount of money you need to survive and a minimum amount of relaxation time to prevent burnout. On the other hand if you have so much free time you are already bored and don't know what to do all day, more free time doesn't have much value. And if you already have a lot of money and almost no time to spend it, more money is not that big of an incentive.

Some people have a clear picture, if they are currently shorter on money or on free time. If you have trouble making ends meet, you will also take comparatively "bad" deals for saving some money. If you are extremely stressed with almost no free time, you will probably pay a lot to get some hours of relaxation. And for the rest of us hourly wage is probably a solid indicator.

0

Your question seems to be:

[Taking into account that Time and money are finite resources], how do you work out what your time is worth? Is it possible to put this into a rational formula?

It is possible to put it into a rational formula.
Your choice will still be a matter of preference (which you call "irrational and emotional").

Let's define our terms:

Expenses =
necessary (food, electricity, housing, medications, work transportation)
+ optional (things you choose to have: better food, life insurance, fun money, etc.)

free time =
time you aren't at work or sleeping (at work includes commute time and lunch time)

Let's say that after expenses you have $516 left each month.
Let's also say that you have 258 waking hours per four week month of free time (16 on Saturdays, 16 Sundays, 6.5 on weekdays).

An accountant will tell you that your time is worth $516/258 = $2.00/hr

That is the rational formula.
But how do you apply it?

This is where you make your choices

If you have to maintain your yard and someone else will do it for $150/month, then it would not make sense from an accounting perspective to hire someone to do your yard.
But if you hate yard work, spending $150 of your $516 might make you happy (be a good choice).

0

The standard way to do this in academic settings (at least those that I've been a part of) is to use something like a choice board or visual analog scale and have people indicate their preference between two things. Those things might be an hour of leisure time vs. an hour of work and $20. If you choose the latter, that suggests that your leisure time is worth more than $20 to you, because you would prefer an hour of leisure to work producing $20.

A later choice might offer you an hour of leisure time vs. an hour of work and $30, and so on. Eventually you can narrow down how you value your time to a specific dollar value (or range of values).

There are problems with this, of course. Stated preferences aren't always the same as revealed preferences, some people are bad at considering the implications of choices, and the nature of the alternative activity matters a lot (so a "general" value of your leisure time is probably not very meaningful without converting all possible alternatives into a directly comparable unit, perhaps a hedon or something similar).

The bottom line:

People value their leisure time very approximately.

0

You wouldn't expect many people on minimum wage wanting to pay $40 to see a movie

There is a big flaw in your logic here.

If you take your example further, since most people have more free time than they spend working, everyone would be at a net loss of earnings just by being alive. Clearly they are not really "paying" these $40 for every missed working hour, or they would be in continuously increasing debt.

So it is not $40, it is a missed opportunity of $40 (and, in the real world, only a potentially missed opportunity at that). To say what you "expect" people would be prepared to pay in missed-opportunity-dollars is pure speculation. People are not used to dealing with this new currency you've invented.

The 9 to 5 shift is not arbitrary. It is to a large extent the natural equilibrium of how much time people are willing are spend working. Most people are prepared to spend 8 hours a day working. Most people are not prepared to spend 16 hours a day working (though of course people do).

To spend every waking hour trying to maximise earning potential would surely make most people utterly miserable. Most people are prepared to sacrifice 16 hours of potential earnings in order to have a healthy work-life balance because, consciously or more likely unconsciously, that is the choice they are already making on a daily basis.

That is to say, in terms of the average case, society has collectively decided that watching a movie is basically worth 40 missed-opportunity-dollars. (using your numbers, anyway)

Another key aspect that you are missing here is the relative value of time. If you are working 20 hours a day, your 4 hour of rests are going to absolutely treasured; that will be your only respite from a very hard life. Even though in absolute terms working 21 hours instead would be the same increase as if you were to go from working one hour per day to two, the former is awful while the latter is easy. Every unit is not created equal.

0

One of the things I value about my leisure time is that it's stress-free. That means I'm relaxing and not constantly thinking about costs and benefits and timescales and metrics. So I'd suggest another approach: don't do sums like this. My father used to call it "measuring your life in coffee-spoons" - a quote from T. S. Eliot. Instead, just enjoy life and relax.

protected by GS - Apologise to Monica Sep 30 at 16:11

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