What's Your Time Worth?

MSN Money gives us six pieces of money math we all need to know. One of their most intriguing ideas is the discussion of what your time is worth. Here’s a portion of their take on the issue:

“If you work, you need to understand the basic concept that you’re trading your time (a nonrenewable resource) for money. So when you buy something, you’re trading minutes or hours or days of your life to procure that thing.

One way to do that is to simply look at your hourly wage. If you make $20 an hour and something costs $40, you can figure that it takes two hours of your life to pay for that thing. (A fast way to estimate your hourly wage if you’re salaried: Knock off the last three zeros and halve the result, so $50,000 becomes $50, which halved is $25. The rate you get will be a bit high but in the ballpark.)”

They add that that taxes and other factors also have to be accounted for. Like many financial issues, determining the value of your time is not that simple.

Which brings us to the question: how do you value your time? Let’s say an acquaintance asks you to do a side work project for him. Do you quote your hourly wage or something different? Or say you have the choice of hiring out some home repair work or doing it yourself over several hours. How do you assign a value to the time you spend working on it? And if you have an unresolved customer service issue, how long is it worthwhile to pursuit it?

Money math you need to know
[MSN Money]

FREE MONEY FINANCE
(Photo: affy4k)

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  1. arby says:

    I decided some time ago that I would rather pay $25 or so to get my laundry done every couple of weeks than waste a few hours at a laundromat doing it myself. I do a better job of matching my socks than the laundry women do, but otherwise definitely money well spent. I guess an important criterion for me in making these kinds of decisions is whether I actually enjoy/get some sort of satisfaction out of the task. A side work project, maybe yes (and it also goes on the resume and might help get future work); drudge work, no.

  2. wring says:

    This reminds me of my wowarcraft-addicted buddy who makes around $28/hour (salaried). He bought Warcraft gold with his real money. I figured it’s very well worth his time, considering how long it takes to collect gold.

  3. stickystyle says:

    @arby
    slightly OT but…there are people I can pay to do my laundry?? Like regular old day to day stuff, not dry-clean? What are these services called? I searched ‘laundry’ at google local around my house and only came up with coin-ops. I live in Miami so I’m definitely in a big city where I think this kind of miracle service would exist.

  4. Gev says:

    @stickystyle: It’s usually the coin-ops where you can get this done. Call around and ask them if they have drop-off service.

  5. spinachdip says:

    @stickystyle: Pretty much every coin-op laundromat in New York has a wash-and-fold service. You pay by the pound, and for me, it ends up being 2-3 times what I would pay if I were feeding the machines myself.

    It’s well worth the extra cost for me too, since laundry is probably the most tedious and sometimes stressful (my local ‘mat tends to get crowded and you have to fight for the dryer) chore.

  6. yarrow says:

    @stickystyle: The magic words are “wash and fold”

  7. lockdog says:

    @stickystyle: You’re looking in the right place. I don’t know about Miami, but during my brief time living in Orlando (ughh) many of my friends would drop off their clothes at a regular coin laundry and pick them up the next day washed, dried and folded. I believe the charge was by the pound, and $25 bucks for a couple of loads sounds right. I’ve seen signs for this service at other laundromats since, so it has to be fairly common.

  8. ifixit says:

    Coin-op services work well, but you may have to pick-up on the same day.@stickystyle:

  9. BoscoSeven says:

    This MSN article was pretty good. The thing I found most surprising was “One way to dramatically illustrate the point is to use the example of the doubling penny. If I give you a penny at the start of the month and promise to double it every day, you’ll have $10.7 million by the end of the month.” I didn’t even believe it so I did the calculations myself and sure enough, it comes out to $10,737,418.24. This is a great example to teach people who don’t have a clue about compounding.

  10. You have no idea how infinitely depressed I am thanks to that salary-to-hourly wage formula. Though, since apparently my time isn’t worth so much I won’t feel so bad about wasting it reading blog feeds.

  11. speedwell (propagandist and secular snarkist) says:

    Could Consumerist PLEASE PRETTY PLEASE do a post about hiring a home cleaning service? I am now at a point in my life where I would rather pay someone to come in once a week than do it myself. (Last year’s surgery isn’t helping my mobility any, either.) But I have zero experience with such a thing. THANKS…

  12. phantomfly says:

    “Knock off the last three zeros and halve the result” is the most depressing thing I’ve read in a news article lately. Can the American public not understand “divide by 2,000″? (Answer: yes.)

  13. Myron says:

    I don’t understand why she would use marginal tax rate instead of effective tax rate. When you pay $50 for jeans, that $50 doesn’t come from your earnings at the top or bottom bracket. Your whole paycheck is taxed at your effective tax rate and that’s the money you use to buy jeans. Also, she ignores sales tax, which is a tax on already taxed funds, so you get a double whammy.

  14. CrazyRedd says:

    I’m with Speedwell; you hear a lot about some of these home cleaning services and how scammy they can be. Not that people wanting their houses cleaned by strangers is as common as people getting ripped off by mobile phone companies but still.

  15. BigNutty says:

    I have also used the “penny doubling” story for years to explain in a simple way how compound interest works.

    I fail to see why trying to figure out what your time is worth is in any way related to your free time. If it involves doing work for your acquaintance, your regular work wages should have nothing to do with what you might charge for this extra work. It could be more or less depending on your knowledge of project.

    I think I better start a laundry/cleaning service.

  16. rdavid says:

    Your time is not simply worth your wage. Suppose you make $100/hr on Tuesdays. That means that your opportunity cost (what you give up) of not working on Tuesday is $100/hr. Anything else you do on Tuesday requires you to forego $100/hr.

    But just because you make $100/hr on Tuesdays, doesn’t mean that your time is always worth $100/hr. On Sundays, choosing another activity does not require you to forego $100/hr, because you can’t make $100/hr on Sundays.

  17. MercuryPDX says:

    @speedwell & @CrazyRedd:

    I had a bi-weekly cleaning service for the past 3 years. Unfortunately when I got laid off I had to suspend them too, but they should be back within a month (fingers crossed). This is a short guide on how to choose:

    1. Seek References. Do any of your neighbors or co-workers use a service? How much is it an hour? How often can they clean? When you narrow it down to a few companies ask THEM for client references.

    2. Ask Questions! When you get the service on the phone, ask… ask .. ask… [in no particular order]
    a) Do you have insurance? (You want a resounding yes. If they break something or get hurt in your home you’re off the hook without using your homeowners insurance.)
    b) Are your employees screened/bonded? (You want a yes here too. This means the employees have had a criminal background check AND should something go awry you can be compensated.)
    c) What type of services do/don’t you provide? (Some don’t do windows or laundry, some do. If you have specific things you need done, ask and ask how much.)
    d) Do you give an in-home estimate? (If the people cleaning your home see what they have to do, it helps determine how much you pay.)
    e) What is your cancellation policy? (Some companies require anywhere from 24-48 hours notice if you need to cancel. Will they charge a fee? hopefully not but some do.)
    f) What are my payment options? (My cleaners would only take cash or a check made out to the company. Some companies will allow you to charge to a CC, or invoice you.)
    g) Do you have any kind of Guarantee? (Most companies will guarantee your satisfaction. Find out ahead of time what the “rebuttal process” is, and what you can expect compensation-wise ahead of time.)
    h) How long have you been in business? (Obviosuly the longer, the better. Make sure you look them up in the BBB to make sure they have a spotless record with them.)
    i) Will the same people be cleaning my home each week? (You want consistency.)
    j) Do I need to be home for you to clean? (This is YOUR call. If you feel comfortable enough to let them clean when you’re out [I do], then do so. If you choose to be home, try to stay out of their way and save any suggestions until they are done.)
    k) Do you supply cleaning products and appliances? (Varies by company. Mine brings all their stuff. If you want them to use specific products, ask.)

    3. Expect the initial visit or two to be more expensive. Before they get into a regular routine, the service should do a top to bottom clean-up of your entire home. This will take longer than a regular appointment. The cleanings they do after that should be maintenance.

    4. Having a service does not mean you can live like a slob. You should try to maintain your home’s appearance as much as possible between service visits. Try to keep things uncluttered and tidy; once your house is clean you’d be surprised at how easy this is to do. The idea again is that they come to do maintainence cleaning, and not a top-to bottom scrub every time they come to your home.

    5. DO leave a tip and call in compliments. If you’re getting great service you should tip anywhere from 15-20%. Be sure to call in to their office and compliment the staff if they do a good job.

    This is all I can think of at the moment. I would love to contribute to a larger article if consumerist decides to do one.

  18. arby says:

    @stickystyle: Other people have already responded on the “wash and fold” concept. I’ll note that pickup and/or dropoff service is also a huge convenience. In my old neighborhood, the local laundromat closed too early for me to get there after work, so I found a place that would collect my laundry bag from the porch, call me to say how much it would be so that I could write them a check, and then come back the next day to drop off the laundry and pick up the check. In my new neighborhood, I usually end up hauling 25 to 30 pounds of laundry a block and a half away, so it’s not a big deal, and I can pick up the laundry if I’m home by 9:30 pm. Good luck with your laundry outsourcing!

  19. Myron says:

    @MercuryPDX: Great writeup. I vote for making this a front page article.

  20. Mary says:

    This is a very very effective budgeting tool. Especially if you hate your job. I look at something and think “I’ll have to work two hours in that place to pay this off…”

    Not so many things are worth that ; )

  21. hoosier45678 says:

    My working day became just that little bit darker when I realized that going to the diner for a tuna melt lunch costs me $50 in food & opportunity costs. (I’m a contractor with the green light to work as many hours as I can stomach.)

  22. JayXJ says:

    I saw an online calculator for this a couple of years ago and I’ll be darned if I can find it now. One of the more interesting tid bits was that those mobile detailing outfits we like so much was not cost effective unless you made like $120,000 a year. Otherwise it makes more sense financially to break out the rags, wax, and orbital buffer and detail your baby yourself.

    God knows I’ve thought of the drop off laundry places. With three girls my wife and I spend an insane amount of time doing laundry.

  23. amt88 says:

    I agree that time is not always worth your wage, but need to consider a couple things:
    Opportunity cost – Say a working mother decides to take time off to raise child, foregoing 100k salary and could instead hire a nanny for 30k
    Enjoyment of activities – Many people might enjoy the challenge or feeling of accomplishment of doing something for themselves instead of paying for it…

    Add the common sense to understand the concept, and you have a bit more complication than the original formula. I still don’t get my brother who makes over 150k chooses to spend weekends doing manual labor around the house when he could hire my unemployed, experienced cousin for $15 an hour.

  24. speedwell (propagandist and secular snarkist) says:

    @MercuryPDX: Awesome, thank you!!

  25. CrazyRedd says:

    @MercuryPDX: Yes, thank you very much!!

  26. ltlbbynthn says:

    this is why I’m procrastinating so hard calling Spring to get them to fix my mom’s calling plan. We’re both supposed to be on SERO, but she’s not and I’ve already dealt with them for 4+ hours and it’s still messed up. She cried when she got her bill. So far, the stress and time wasted hasn’t been worth the $15 a month to fix it.