My Time is Worth WHAT?!

Inevitably, a New Year leads to time spent reflecting on one’s goals and happiness with life.  Many people make New Year’s resolutions that are related to money, often because their financial situation is a source of great unhappiness.  I’m not exactly thrilled with my financial situation, but I had already gone through the process of establishing my financial goals last summer.  That was when I graduated from a full-time MBA program with zero savings and about $28,000 in debt in the form of a home equity line of credit.  I was lucky enough to have a full scholarship that covered the actual cost of my education, but the HELOC was necessary for ordinary living expenses.  And because I was not yet as disciplined in my spending as I am now, the HELOC was also spent on some less than necessary expenses. 

After graduating in a completely lousy economy, I took a good hard look at my financial situation and was none too pleased with what I saw.  I established two financial goals for myself to achieve over two years:

  1. Build up an 8-month emergency savings of $24,000
  2. Pay off the $28,000 in HELOC debt I accumulated while in school

These goals are so basic that I really have no need (or means) to pursue other financial goals at this time.  So for me, the dawn of 2010 was not a time for new money-related resolutions.  Instead, I decided to get a better understanding of the value of my time. 

I’ve heard people refer to money as something you trade your life energy for.  I think this is a really great concept.  I enjoy my work, but there are about a million things I’d rather be doing than working.  I am not one of those people who will one day delay retirement because I don’t know what I would do to fill my time.  As far as I’m concerned, retirement can’t come soon enough.

This made me curious about how much I had to work to have extra spending money for non-essential items I like to buy.  In other words, after savings and necessities are covered, what is left and how much of this discretionary money do I earn per hour worked?

What did I discover?  My time isn’t worth nearly as much as I thought, and the things I buy for fun, vanity, or entertainment cost me a LOT of time at work.

Here’s how I calculated the hourly rate I earn to spend on non-necessities:

  1. I started with my take home pay.  This is the amount left after taxes, contributions to my 401(k) and regular savings, deposit to my Health Savings Account (HSA), and health insurance premium payment.  If you do this calculation for yourself and don’t have an automatic direct deposit to savings, be sure to subtract the amount you contribute to savings from your take home pay.
  2. I then subtracted my fixed monthly payments.  These are things like rent, phone service, and my monthly payment to the infamous HELOC.
  3. Next, I subtracted my average monthly expenditure on necessities.  Necessities include items like groceries, gas for the car, and utilities.
  4. I took what was left and divided it by the average number of hours I work in a month.  I’ve been good about working 40 hours per week and not putting in much extra time, so I calculated that a typical month for me has 176 hours (I erred on the high side).  If you are someone who works more or less hours, you should take this into consideration when doing this calculation.

This calculation will tell you how much “spending money” you have each month to spend on non-essential items.  It will also tell you how much spending money you earn for each hour you work. 

In my case, I earn $6.45 of spending money for every hour worked.  Considering that I am currently saving fully one third of my income (see goal #1 above), this is actually not bad.  I have a low cost of living and no car payment.  Even so, I was surprised that the “extra” money I have per hour worked is only $6.45.

What does this mean in terms of the cost of things I buy?  Below are some examples of how many hours I have to work to afford the non-essential items I enjoy consuming:

  Cost Hours Worked
Dinner at my local sushi place $20 3.1
New pair of shoes $120 18.6
Haircut and color $150 23.3
Movie ticket, popcorn, and soda $17 2.6
E-Book for my Kindle $10 1.6
A domestic vacation of 4 – 5 days $700 108.6
Christmas presents for friends & family $500 77.6
Monthly gym membership $37 5.7


This exercise gave me a new perspective on some things.  First of all, it made me feel very fortunate to have a fairly well paying job in a terrible economy when so many people are unemployed or underemployed.  A lot of people have jobs that pay them a gross income of little more than $6.45 per hour, and this money has to cover not just “extras” like I’ve listed above, but all of their necessities as well.  I am very lucky to have the option of spending some of my money on pricey haircuts and dinners in restaurants.

Secondly, this exercise made me appreciate how much of my time I have to sacrifice to buy the things I enjoy.  In some cases, I think it’s well worth it.  A $10 e-book that I can “earn” in just over an hour and a half of work will bring me dozens of hours of entertainment.  On the other hand, I’m not sure that the fabulous pair of shoes that goes with exactly one outfit in my closet is worth the 18+ hours (more than two days!) I would need to work to afford them. 

In 2010, I am going to focus on the number 6.45.  Whenever I’m debating whether or not to buy something I want (but don’t really need), I’m going to divide the cost by $6.45 and think of the purchase in terms of hours worked.  I suspect that I will often find that it is much easier to put the shoes down and walk away when I think of them as time spent at work.



Filed under Value of Time

8 responses to “My Time is Worth WHAT?!

  1. Sara

    I love the blog and your first entry is great! It’s a little sobering to think of how long I have to work to be frivolous! But it does very much help to put those discretionary purchases into perspective. I’m looking forward to doing the calculation myself!

  2. Sandi

    Wonderful! So glad Sara shared this with me, although I wish it was 30 years earlier. Congrats on having it together long before a crisis.

    Interesting concept – how long did I work to afford (fill in the blank). Thanks for the food for thought!

    I look forward to more …

  3. What a great first article. That gives me a new perspective on how my money is earned.

  4. Kim

    You go, girl! This is wonderful! Can’t wait to see your progress!

    In my journey on and off the path to frugality, I have found the following four thoughts help. For ANYTHING you buy, ask yourself:
    1. Can I use less?
    2. Can I buy it cheaper?
    3. Can I make it last longer?
    4. Can I do it myself?

    It turns out, you can still get lots of things you want without spending a whole lot of money. 🙂

  5. Margaret

    I LOVE your column and look forward to more. What will you do with the discretionary money you save – spend it on more worthwhile items or accumulate it rather than have it spent quickly?

  6. Karah

    Love it! Look forward to more. Hope you’re well.

  7. J. Hous would be proud. Great analysis of breaking down discretionary income into equitable hours worked. This definitely puts things in perspective and will certainly help you reach your goal. Best of luck!

    If you haven’t done so already, open a high yield online savings account. HSBCdirect or INGdirect are good options. Online savings accounts provide the highest APYs because they don’t have the high overhead of brick-and-mortar banks.

    Also, stay away from CDs >6 months for now. Once the economy picks back up (hopefully in 2010) the rates will start to creep higher and the opportunity cost of the CD will overcome the benefit.

    Plus, check out and – deal websites are great places to find frugal buys.

  8. Rebecca

    Great blog!
    I’ve always been one to obsess over how many hours I had to suffer at work to earn the things I wanted. Now that I’m married, we should be rolling in the dough (double income, no rent, no utilities), but instead, we’re eating the dough! We spend more money on food than seems possible. It’s disgusting. I think I’m gonna threaten my husband that I’ll post our expenditures from this month on your blog for the world to see! If he doesn’t fear my wrath, maybe he’ll at least fear public humiliation!! 😉

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