Chapter 4

Putting a Value on Your Time

Depending on your values, different kinds of numbers may be important to you: To some, it's cholesterol count and blood pressure figures; to others, it's the number of years they've been married. To many, the sum total in the retirement account is the number-one number, and some people zero in on the amount left on their mortgage.

But I contend that your per-hour worth should be among the top-of-mind numbers that are important to you — no matter what your values or priorities are — even if you don't earn your living on a per-hour rate. Knowing the value of your time enables you to make wise decisions about where and how you spend it so you can make the most of this limited resource according to your circumstances, goals, and interests.

Obviously, the higher you raise your per-hour worth while upholding your priorities, the more you can propel your efforts toward meeting your goals, because you have more resources at your disposal — you have either more money or more time, whichever you need most.

In this chapter, I guide you toward optimizing your value so you can reap the rewards and attain what's most important to you. I start by showing you why your hourly value is crucial to effective time management. From there, I help you calculate the overall value of your time based on your employment income. (If you have an hourly job, you can skip that section.) Then I help you decide how to leverage your time and money, both in your career efforts and in your personal choices, so you can boost your hourly value and get the most out of your time investment.

Getting a Good Grip on the Time-Equals-Money Concept

Your per-hour value translates to your quality of life, both now and in the future. Not only does your income influence how you spend your nonworking hours, but it also determines how much leisure time you have to spend.

As you can imagine, your hourly value reaches beyond the basics: It impacts your health, too. For instance, studies show that lower-income earners have more health problems, including heart disease and diabetes, which are often attributed to poor diets and a lack of medical care. Also, low-income earners have less free time to invest in exercise because they have to invest more time to provide for the basic needs of their family. Additionally, the challenge of trying to make ends meet can cause great stress, leading to not just physical illness but also to depression and other mental health problems.

And though it's important to live in the present, it's also important to keep an eye toward the future. How well you prepare does have an impact on your quality of life right now. Making enough money to be able to save for retirement and other major life expenses — including a child's education — results in a sense of comfort and safety about your future.

Your personal time has value, too. And by having a grip on the value of your work hours, you gain a better grasp on what your downtime is worth. After all, most people work so they can make the most of their personal time, whether they're devoting it to family, hobbies, volunteer work, travel, or education.

I was recently on a coaching call with an amazing client who sells real estate in Fredericksburg, Virginia. She has more than doubled her income in the last few years. Her challenge is balancing her thriving business with her true priorities in life — her boys and husband. Because she has raised her hourly rate in business, some of the home tasks, such as laundry, meal shopping and preparation, and house cleaning need to be reevaluated as to their value.

Before you get ahead of me here, certainly someone needs to do those functions for any family. The point I made to her is that it didn't have to be her. Because of these tasks, she was staying up late or getting up early to complete them. These normal activities caused her to work longer hours, miss opportunities in business, and feel detached from the family fun because she needed to get the laundry done or the house cleaned. After discussing and evaluating I said, “You could hire someone to clean the house, do the laundry, and prep a few meals a week for you for about one to two sales per year.

Would that be worth it to you?” She just needed understand to trade her time from a lower-value activity to a higher-value activity.

When you recognize that your free time has a monetary value, just as your work time does, you gain the perspective you need to make choices:

But what is an hour of your personal time worth? Well, that's not a question you can easily answer. How do you put a price on time with your young children? Or apply a dollar value to travel experiences that bring you in touch with new worlds? Or equate the quiet therapy of a walk in the woods with the stress of a work presentation?

The harsh truth is that you don't get paid for not working. But that doesn't mean your personal time has no monetary value. Just thinking about your time as a commodity with a value helps you sort through and recognize the activities that are most important to you. (For information on valuing your personal time, see the later section “Making Value-Based Time Decisions in Your Personal Life.”)

Calculating Your Hourly Income

No matter your occupation, everyone sells time for a price; it's just a lot more transparent in some situations than others. Most obvious are individuals who receive a wage or a fee based on the hours they work, including minimum-wage workers and self-employed individuals such as tutors, house cleaners, and consultants.

What you are paid per hour is based on the activities you do and the skill you bring to the marketplace. A pilot, by that nature of the skill and what pilots do, has more value than a flight attendant. There are fewer people who could pilot the plane than serve as a flight attendant.

If you are a lower-wage earner, it's because the job you currently have does not have the value to pay you more. If you stay in the present position, you might gain raises over time, but there will be a limit. A fast-food counter worker will not be paid $50 an hour … ever.

Your objective should be to raise your value so you can advance to a higher-value job that pays more. Too many people focus on the wrong area. A low-wage job is there to help you acquire skills, show aptitude, passion, drive, and commitment. No one is supposed to stay at that pay for his or her whole life. What we are paid for our time starts at minimum wage. Wage ladders enable you to climb up to higher compensation levels, but you have to do the climbing!

Other people advertise their prices based on a per-project basis, but in reality base that fee on an estimate of project hours the job takes. Freelance writers, for instance, may charge $1,500 to write a promotional brochure, but that amount is likely a reflection of the writer's value of his or her time at a certain figure — say, $75 per hour multiplied by 20 hours of production time.

Some businesses and professions charge customers based on an hourly rate, although workers don't directly receive that per-hour fee. Instead, their salary or compensation is based on the revenue the company can bring in based on those hours. Law firms and plumbers, for example, may charge for their services on an hourly basis and pay their employees a salary or a per-hour rate.

If you earn a salary, you may not perceive yourself as having an hourly rate. But everyone does. Here's how to calculate your hourly income. This number doesn't affect how you're paid, but it puts you in touch with what an hour of your work time brings you.

1. Calculate the number of hours you work per week.

   

   To be completely accurate, calculate your hourly rate based on the hours you actually work. If you consistently put in more than 40 hours a week (most salaried folks aren't paid overtime for additional hours worked), add those hours to your total. Here's an example:

   

2. Figure out how many hours you work per year.

   

   Make sure you subtract time off. For instance, if you take three weeks of vacation each year, subtract that from your total number of weeks worked. If your salary is based on a three-week vacation and an average 42-hour work week, here's how many hours you work per year:

   

3. Divide your gross salary by the number of hours you work per year.

   

   For instance, $80,000 divided by 2,058 hours is $38.87.

Boosting Your Hourly Value through Your Work Efforts

Money isn't the scarcest and most valuable resource; time is. There are plenty of ways to make more money, but there's no way to add more minutes to an hour. You have a limited amount of this precious commodity, so you want to protect it and spend it as if it's your own personal trust fund.

Most people think that if they work more hours, they'll automatically make more money. That's faulty thinking: You can devote more hours to work, but if you invest the hours in the wrong actions, you gain nothing — and you lose time.

The solution may be to ask for more money for your time. Some workers have a good deal of control over their hourly income and can therefore charge more per hour for their services. The freelance writer can raise her hourly rate from $65 to $70 and bring in an additional $50 on a ten-hour project. A tax accountant can increase the fee for income tax preparation from $450 to $510. If he needs six hours to prepare the average income tax return, the accountant just gave himself an increase from $75 to $85 an hour.

However, the simple fact is that most people don't have the luxury of raising their income at will. So what's the next best step? Change how you use your time so you get the best return on investment — after all, what you do with your time leads to greater prosperity.

To increase your hourly value, you have to decide whether you'll work toward earning more money or earning more time. Then focus on performing high-value activities to achieve that goal; the process of discovering the really important actions or items you can invest your time in can help you change your hourly rate. The decision of how to increase your hourly value — whether to work toward generating more money in the same amount of time or generating the same amount of money in less time — depends on your circumstances:

If, however, your job doesn't enable you to increase your hourly value, whether in terms of money or time, then you have bigger decisions to make. Other changes you can make to directly impact your income are to simply do the following:

When evaluating time-for-money trades, be sure not to limit your definition of return to money: Ask yourself whether the exchange improves the quality of your life. Look at how your life would change outside of work if you were to double or triple your hourly rate. If what you're trading for dollars does any of the following, it's a good trade.

So that's a simple look at the overall strategy behind improving your return on investment. Chapter 5 takes you through the specifics, helping you schedule your to-do list each day so you make sure all your efforts align with your goals, which you outline in Chapter 3.

Making Value-Based Time Decisions in Your Personal Life

When you consider the way you live your personal life, divide your focus into two categories: chores/responsibilities, and leisure time. Although personal time may seem straightforward, there really is a difference between chores and leisure activities, and the way you approach your time-management decisions hinges on that difference. But however you spend your personal time, you can assign that time a value equal to your work worth — even though no one's paying you — to help you decide how to spend it.

Deciding whether to buy time: Chores and responsibilities

When you have a handle on the value of your time in hourly increments (see the earlier section “Calculating Your Hourly Income”), you have the information you need to make better time choices. The chores have to be done, whether you do them, or delegate, or even pay someone else to do them. The question with chores is whether you want to do them yourself or to exchange dollars for someone else to do them. You have to ask, “Is the cost of the time this task would take me greater than or less than the cost to hire someone to do the work?” Here, you're simply comparing numbers. Think of the laundry list of household chores and personal errands that can eat up every bit of personal time you have. If you could pay someone to do some of those tasks at a rate equal to or well below your hourly rate, wouldn't that be a good return on investment?

I have to admit I am not a big fan of yard work. It might date back to my father owning a number of real estate properties and from about the age of 10 I was the chief landscape guy for his properties. I have mowed acres of lawn, pulled tons of weeds, spread thousands of cubic yards of bark dust. I have done my fair share of yard work in my life. I was paid well for my efforts in my formative years, learned commitment, how to work hard, hitting deadlines … and many other valuable life lessons.

I haven't touched a mower, edger, or weed whacker in more than 20 years. The value I can create in life with my family or in business doesn't warrant the activity of yard work. I can pay a professional $100 to $150 a week for the couple of hours it takes to maintain my yard. The value of any time is well beyond the $30 to $50 an hour to have this done. All time in life is a trade. You are trading your time for something you desire, want, or need. I'm blessed that I have the option to trade away things I don't want to do in exchange for things I do want to do. The evaluation is based on your value of time and enjoyment of a particular action or activity. If you have all kinds of free time on the weekend — and you enjoy being out in the yard — paying someone else to cut your grass may be a money-time trade that has no value for you.

If you love to garden but hate cleaning the house, and cleaning the house takes you 4 hours ($200 if your time is worth $50 per hour), why not pay a housecleaning service $70, $80, even $100 to buy back the four hours it'd take you to do it all? And you buy yourself four blissful hours puttering over your zinnias and scarlet runner beans.

Making time-spending decisions: Leisure activities

With leisure activities, your decision simply hinges on whether you want to do them at all. Unlike chores, which you have to deal with in some way, you can get away with forgoing certain pastimes. When you're faced with decisions on whether to accept an invitation or volunteer for a committee or do any other activity, that can affect your leisure time.

Looking at rewards

A leisure activity has to bring you as much joy or value as your hourly income rate. Some things you do will be priceless, whereas others are worthless or even less than worthless because they drain you rather than fill you up. So with leisure activities, you aren't comparing numbers — you simply decide whether a given activity is worth your hourly value. Consider the value of the activity in terms of

Factoring in monetary and time costs

Another factor to consider when choosing leisure activities is the cost of your free time. Often, that time isn't so free — you undertake activities that require some recreational funds. When you have to pay to enjoy certain recreational or leisure activities, take the cost of the activity and add it to the monetary time-cost you'd have to pay for the activity. In short, would you pay the cost in your hourly value (plus any costs of the activity itself) to participate in that activity?

Say your income equates to $35 an hour. If an acquaintance you're not all that crazy about invites you to her jewelry party on a weeknight, you'd be looking at, say, a two-hour cost of $70, plus any money you'd spend while there. Should you go? Probably not, if this acquaintance really isn't someone you prefer to spend your time with.

Or how about this scenario? A local nonprofit asks you to be on a committee that requires an average of ten hours per month. Total value: $350 worth of your time each month. Is the value earned from your time donation worth the cost to you? How does it factor into your overall goals? Do you enjoy being on the committee and do you feel passionate about the nonprofit's mission? Do you have other more important things you have to tend to first?

The money-to-time-value consideration extends to even the seemingly most mundane of activities — for example, dining out. Going out to a two-hour dinner with a family of four may rack up $80 or more. If you earn $80 in one hour, this may seem like a fair trade — you're paying $80 for something that would cost you $160 in time. But if your income is $20 per hour, you're essentially paying $80 for something that's worth only $40 in time. That may seem steep for a midweek convenience grab; however, if you're celebrating your child's first straight-A report card, it may feel like a fairer trade.

How about a week of vacation? Travel, hotel, and food on the road can add up fast. If you and your partner total up $3,000 in expenses for a beach resort getaway, at $80 an hour, that's 37.5 hours — not quite a week's worth of work hours … and not a bad deal, you may think. The fact of the matter is this: The decision of whether an activity is worth its cost is completely subjective. That idea is certainly empowering and freeing, as long as you make conscious choices about where you dole out your hours.

Staying open to experiences and using time wisely

The process of evaluating your leisure time is meant to help you use your time well, not to limit your experiences. If you're unsure about a certain activity but you had fun and found it worthwhile in the past, you should probably go. Also consider going if it's part of your current or future goals. If you enjoy the people but not an activity, you can suggest a change of venue and make the outing more worthwhile.

If you give up activities and find yourself mindlessly wasting the time you gained in front of the TV or online, you likely need more clarity in your goals. Or your goals may not be compelling enough. Chapter 3 can help you sort out your goals and pinpoint the activities you find most fulfilling.