What is my time worth? Monetarily.
I’m a pretty frugal guy. I don’t like spending money when I can do it myself. But then I got to thinking of why people say “it’s not worth my time”. How much is your time worth, I though. How much is MY time worth? Should I just pay someone?
So I Googled “what is my time worth formula” and came up with some blog posts that kind of made sense… but not really. I’m an engineer by trade so I thought I could figure out how to quantify this. These formulas incorrectly used or skipped key variables which in turn severely inflated how much a persons time was worth.
One guy got it sort of right by adding in commute time to work. But he missed some critical things as well. For example, he was using gross income instead of net.
Anyways, without further ado. The simple formula to value your time… (Net income from all sources / ((24 — Average hours slept per day) * 365))
When you’re sleeping you can’t spend, earn, or do it yourself… so it’s irrelevant and will just devalue the worth of your time. However, when you’re awake you could be earning, eating, playing with your dog, etc. All of this time is choice and should play a factor for how much your time is worth.
Let’s give an example for a person earning 50k a year before taxes. Assuming the total tax burden is 35% that leaves the person with $32,500. If you have obligations such as child support you may want to deduct it as well. For something like mortgage or rent you may want to leave it out, as you are choosing to continue living there. It’s currently worth part of your time.
This average John Smith sleeps 8 hours a day so his time is worth 32500/((24–8)*365)=$5.57/hr
Now that you know how much your time is worth in dollars you might be able to make decisions easier like “should I change my own oil?” Keep in mind this excludes emotional value like being walk home on lunch to spend time with your dog, or learn a new skill like changing brakes on a car!