Updating Your Time Worth to Reflect Life Changes
A few years back, I described the importance of knowing what your time is worth. As income levels and leisure time fluctuate, recalculating your time worth makes sense. You’ll want to ensure that your cost-benefit analysis uses accurate information. Otherwise, you may reach incorrect decisions.
Over time, many of the parameters used to calculate the value of your time can vary considerably. You may be earning more money, thanks to raises, or significantly less money if you’ve had periods of unemployment. The cost of childcare may have increased, or been significantly reduced as young children reach school age. Changes in your spouse’s situation can have a similar effect. All of these factors, and more, contribute to the value of your time.
You may also find that you have different “time worths” depending on how you plan to pay for things. If a particular service would take you 2 hours to do yourself or $100 to pay someone else to do it, you might conclude that it would be worth paying someone else to do the work if your time is worth more than $50/hr. But you have different ways to be able to pay for this service. You might choose between putting in some overtime at work and selling some services online. For overtime, you’d have to earn a lot more than $100 to have an extra $100 of take-home pay because of taxes. Depending on what you sell online, it may not be subject to taxes, so a $100 sale would truly net you $100.
For that matter, you might have more than one job. Knowing the value of your time for each could help you to choose the most appropriate place to put in extra time. For me, there’s a huge difference between an extra hour at my day job and an hour’s worth of extra work on my blog.
The simple truth is that our decisions are only as good as the information we have on hand. By keeping an accurate estimate of the value of your time, in its different forms, you’ll be able to make the best decisions between doing work yourself and paying others to do it for you.
How many different ways can you think of to value your time?
Wednesday, April 22nd, 2009 at 6:24 am