What is your free time worth to you?

Over on the economics blog Marginal Revolution, a reader asked Tyler Cowen how to determine the financial value of his free time. Cowen responds in the post “What’s the value of your time?

As usual, the correct answer is “it depends,” but here are a few principles:

  1. Don’t value your time by your implicit wage rate, no matter what your Econ 101 text says. For most jobs you are assigned some lumpy tasks and you don’t control your work hours at the margin as much as you might like to. The key question is whether the overall pattern of your time is an enjoyable one and marginal calculations aren’t always a good way to make that estimation.
  2. Ask the simple question: at what valuation of my time will I maximize the amount I look forward to each day, defined over the next five years? If your next five years are not so tolerable, reexamine what you are doing and that includes revaluing your time. For instance you might be an irrational workaholic or a lazy bum.
  3. Look to the economics literature on “golden rule” and “steady-state” path comparisons to address this problem. If need be utter the word “Flow” and try to remember how to spell that guy’s name so you can google it.
  4. What do you want time for anyway? When is your time ever “free”? If you choose to work more for money, isn’t that time “free” too? Only if your job is a total drudge should you frame the choice this way.
  5. Focus on defining the experiences you value most, and how to get more of those experiences, and wise money/time choices will flow from that approach.

Increasing or protecting “free” time to pursue what matters most to you is almost everyone’s top priority for an uncluttered life. Cowen’s valuation suggestions — in my opinion, especially two, four, and five — are a good starting point to figuring out this number for yourself.

Have you ever tried to determine the value of your “free” time? What do you think of Cowen’s valuation suggestions? I’m extremely interested in hearing from you in the comments. I find this to be a fascinating exercise.

18 Comments for “What is your free time worth to you?”

  1. posted by Shalin on

    …I think about these and similar issues when I want to do some DIY thing in the house. Is my time spent/worth better doing something else? Would resting and paying someone to do a higher quality/value job be better for my dollar? What is my enjoyment of doing something with my spare time? etc., etc.
    –S

  2. posted by Anyazs on

    I’m with Shalin… what services do you pay for and how much extra time does it give you? Assuming indifference to the task, a cleaning service, for example, is just buying leisure time.

    I think this in addition to some implicit wage rate is the way to go… I agree with Cowen a bit in that I can’t really use my current hourly rate if there aren’t more hours to work. But I *could* do something with my non-working time to make more money, even if it’s just a minimum wage job.

    So… the sum of the wages paid to household work contractors and the wages you’re forfeiting by not working (which could be zero if there is no paid work you could be doing) = the value of your leisure time?

  3. posted by Rebecca on

    So, I read a book a few years ago when I was mired in consumer debt and trying to get a handle on my spending habits. It absolutely changed my life. It is called “Your Money or Your Life” (http://bit.ly/6PNIZt). The quick and dirty version is that you trade your life’s time and energy for the money you earn, so what you spend your money on better relate to what’s important to you. I believe this message is wholly consistent with the “remarkable life” analysis in “Unclutter Your Life In One Week”, and I try to apply it whenever I can. (Though, I admit, I am a work-in-progress and still fail regularly at this.)(Though, my consumer debt is now eradicated, so I’m moving in the right direction.)

  4. posted by Theresa on

    I’m with Rebecca – “Your Money or Your Life” is one of the most important books I’ve ever read, and I second every one of her statements.

  5. posted by Roshni on

    I agree with all the comments. This would also apply to how much time I take clipping coupons and searching for deals versus getting the product at a time and place convenient to me; as well, as spending my time cleaning the bathrooms top to bottom versus paying some one to do it for me!

  6. posted by luxcat on

    I would like to investigate this topic from the pov of people who live in areas where the cost of housing can be up to 50% or more of your income. Yes, one argues you could move to a cheaper area, but what if that means living farther from family, etc? At what point does uncluttering your time/job/downsizing start not really paying back anymore?

  7. posted by Justin Wright on

    I think free time is the most important aspect of overall happiness. Too many people tend to focus on buying things, which ends up leading to even less free time since you have work more to pay for everything.

    As Rebecca mentioned about, Your Money or Your Life is a great book that will really open your eyes to the idea of money and “life energy.” Every second you spend working for money is less time doing/enjoying the things you really love in life. Unless of course you love your job, then more power to you!

  8. posted by Lori Paximadis on

    I am a big fan of DIY, but this past year for the first time we hired a lawn service. Absolutely a great decision for us. My husband works 70+ hours/week, and my workload is unpredictable, so neither of us is certain to be able to get out there and spend the necessary time on a regular basis to keep it looking good. The service costs less than my going rate for the amount of time it would take me to do it myself (and an even smaller fraction of my husband’s going rate), and I don’t have to worry about gas or maintenance or any of that. Now, they aren’t as careful as I would be with certain things, but I’m (slowly) learning to let it go. Whatever time I gain in the weeks I’m not slammed with work I can spend working in the gardens, which is where my true love of working outdoors lies.

    I agree that Your Money or Your Life is great for some broad perspective when looking at money issues. But for the literal-minded, keep in mind that it was originally written back in the early 1990s, when bond yields were quite a bit higher than they are today. If you get hold of an old edition, you probably want to take the advice about living off of T-bill interest with a sack or two of salt.

  9. posted by Allison on

    Hello, my name is Allison and I am a sufferer of free-time guilt. That kind of guilt you get when you make time to do something like have a glass of wine and read a magazine even though there’s *technically* something you *could* be working on, but it’s not urgent, but you still feel the need to get it done before allowing yourself to have fun.

    This kind of attitude has caused me to become WEEKS ahead in my schoolwork, which is just silly in a university setting where most students are turning in papers approximately 5 seconds ahead of deadline. As schoolwork isn’t measured in money, I have trouble relating to people who see their time as salaried.

    (I have even abused uncluttering sometimes as a means of not giving myself deserved free time– “why watch that TV show I wanted to watch when that closet still needs to be cleaned out!”)

    Does anyone else have free-time guilt syndrome like I do? Is there some kind of strange online support group for this?

  10. posted by chacha1 on

    Free-time guilt syndrome – oh you poor dear! I have moments of this; I want to sit and watch HGTV for an hour on Saturday morning, but my to-do list nags at me. Fortunately I have a lap cat to pin me down and FORCE me to be pleasantly idle.

    Allison, I think you may just be a very high-energy person at this point in your life. Go ahead and be busy. You may change later on in life and you’ll be able to look back with pleasure at how productive you have been.

    @ luxcat: My free time is priceless to me. You can always make more money, but you can’t make more time. DH and I both feel this way, which is why we’re content to pay a high rent to live in the city rather than half that amount to commute for an hour or more each way.

  11. posted by Tom on

    Just a few minutes ago I came across this article at Onion:http://www.theonion.com/conten.....der_for_36
    A funny story to complement this blog :)

  12. posted by The Simple Dollar » The Simple Dollar Weekly Roundup: Stomach Bug Edition on

    […] What is your free time worth to you? I think the wisest statement here is this: “Focus on defining the experiences you value most, and how to get more of those experiences, and wise money/time choices will flow from that approach.” What really matters the most to you? Put that on top of everything else. Go from there. (@ unclutterer) […]

  13. posted by The Simple Dollar Weekly Roundup: Stomach Bug Edition | Frugal Living News on

    […] What is your free time worth to you? I think the wisest statement here is this: “Focus on defining the experiences you value most, and how to get more of those experiences, and wise money/time choices will flow from that approach.” What really matters the most to you? Put that on top of everything else. Go from there. (@ unclutterer) […]

  14. posted by The Simple Dollar Weekly Roundup: Stomach Bug Edition on

    […] What is your free time worth to you? I think the wisest statement here is this: “Focus on defining the experiences you value most, and how to get more of those experiences, and wise money/time choices will flow from that approach.” What really matters the most to you? Put that on top of everything else. Go from there. (@ unclutterer) […]

  15. posted by Richard | RichardShelmerdine.com on

    My free time is the time in which I recuperate my energy to work during the work times so it’s just as essential. It’s like in exercise. Relaxing is as important as the exercise.

  16. posted by Joe T. on

    Boiling it down, it looks like it’s just the economics phrase “Opportunity Cost.”

    This phrase has begun to work for me. I look at a pile of papers that I think have valuable tidbits in them, and then think of the lost opportunity of doing other things (albeit they’re usually nameless and faceless things), and it usually comes out in favor of chucking the pile.

  17. posted by The Simple Dollar Weekly Roundup: Stomach Bug Edition | Rich Dad Poor Dad Blog on

    […] life. It all starts with a goal, and then a plan assembled on top of that goal. (@ wise bread) What is your free time worth to you? I think the wisest statement here is this: “Focus on defining the experiences you value most, […]

  18. posted by deb on

    #2 sounds like calculus
    can someone explain

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