Time is money, but how much?

ONE of the biggest dilemmas in everyone’s life – from the beggar down the street to the millionaire at the yacht club – is the trade-off between time and money. 

How much time should you spend earning money and how much money should you give up to enjoy leisure time? 

How should you distribute your time making money, making friends, making a positive impact?

Everybody knows the saying “time is money”, but how much is our time actually worth?

 Here, I’ll share 3 different approaches to get a grip on how much money your time is actually worth. You may be surprised that the different approaches give you different “hourly wages”.

It means you are not consistent in valuing your time (you are not alone, the majority of us are not consistent).

The simplest way is called the Salary Method: you calculate your take-home monthly salary and divide it by the number of hours you work per month.

If you take home RM3,000 and you work 40 hours a week, four weeks a month, you will work 160 hours for RM 18.75 an hour. 

This approach shows the downside of a high salary: giving up an hour of work for free time becomes more expensive. This is called the “golden cage”, as the high cost of not making money locks you up mentally.

Unless you work for an hourly wage and you can choose the number of hours you work, the Salary Method is not truly flexible. 

For example, a Grab driver, courier, factory worker, nanny or Starbucks employees may be able to use this approach to a certain extent, but not many others.

If you are a white-collar worker, working like a dog for the boss man, you are in a different situation. 

First, your boss will probably not allow you to work five hours less in any given week if you feel like it and would accept a proportional reduction in salary. 

Second, your employment contract may stipulate that your salary already compensates for any necessary overtime, which means you won’t see more money go into your bank account if you go the extra mile and put in a few more hours. Hence, we need different approaches.

The second approach is called the Savings Method: calculate how much time you are willing to spend to save money? 

If you are okay with standing in line for 15 minutes to get a free RM6 pretzel, you value your time at RM6 x 4 = RM 24 per hour. 

If you drive an additional 10 minutes to save RM5 on a full gas tank, you value your time at RM5 x 6 = RM30 per hour. 

If you can buy the new iPhone RM 100 cheaper after searching for it online for 2 hours, you value your time at RM100 / 2 = RM50 per hour.

The third approach is called the Market Rate Method, instead of saving money as in the second approach, ask how much you are willing to pay to save time. 

Would you be willing to let a cleaner do an hour worth of ironing for RM25 but not for RM30? Then your time is worth between RM25-RM30. 

Do you spend an hour to pick up or drop off a package that a courier could do for RM16? That that’s the value of your time. 

Are you willing to pay RM100 more for a direct flight which is 3 hours shorter? That makes the value of one hour of your time RM33.

Personally, I have taken more expensive flights, because it allowed me a good night’s sleep, instead of departing and arriving in the middle of the night.

I have also limited researching cheaper prices or collecting multiple quotes from suppliers to expensive, big ticket items only, where saving money makes a bigger impact.

Some time – like the time spent with your children or loved ones – is invaluable. 

Think about where you spend your time and how much you will earn or save because of it, or how much it will cost you to let someone else do it. 
Use the approaches above to calculate how much your time is worth according to your decisions and contemplate whether that is an acceptable “hourly wage”. 

Mark Reijman is co-founder and managing director of https://www.comparehero.my/ dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, loans and broadband plans in Malaysia.