How to Estimate the Value of Your Free Time in Dollars

As the saying goes, time is money. But what is the actual value of your time? It can be useful to assign a cost to your free time when choosing what to do with it in order to understand the actual trade-offs you're making.

Determine the value of your working hours

The conventional approach to assigning a monetary value to your time is to think about how much money you make annually and divide it by the number of hours it takes you to make that money. If you're interested in learning more about the specifics of this computation, you to take into account all of the time you invest in trying to make money, such as your commute and drop-off times for childcare. Divide your salary by the total number of hours you counted, and that's all.  The average person works 2,500 hours a year in a full-time job.

According to this calculation, your time is worth $24.98 per hour if you earn $62,455 per year, which was the median income for men in the U.S. Therefore, if you spend an hour trying to earn or save anything less than $25, it would be a waste of time. And that's a useful calculation for contrasting jobs: It might not be worthwhile to change jobs if, for example, the position you're considering pays more than your present one but requires a long commute.

However, I don't believe that's the best perspective to have of your leisure time. It's not like you're wasting $5 if you spend an hour shopping at a flea market and save $20 on something you were going to buy otherwise. You have free time to do with as you like, and you have already earned it by working during working hours.


Compared to what you could make working, compare your leisure time.

Asking yourself what you could be doing with your time right now is another method to approach this. Any hour could perhaps be a working hour if you freelance, as I used to.

Let's use an example where you have a side business that earns $20 per hour. You might as well pay the extra $12 and use that hour to work if you had to spend an hour browsing around to save $12 on something you needed to buy. You'll finish $8 richer than when you began.

The issue with this approach is that you might not want to work constantly. Paying the delivery cost will allow you to buy an hour without commitments if you have to choose between spending money or time on a task, such as grocery shopping.

What you would pay to simply not work at all is more important than what job you would prefer to be doing at that time.


Include surge price.

In the end, you should judge, not compute, the value of one hour of genuine free time. I only have a certain number of hours in a day that I am willing to devote to work, in my opinion (be it paid work or unpaid work, like childcare or household tasks). You just cannot pay me enough to give up one of my two hours of free time if I am so busy that I only have, say, two hours left to myself.

In that regard, I believe a surge-pricing model would be a more sensible strategy for valuing your day's hours differently. According to surge pricing, prices increase in direct proportion to the level of demand. You have a high demand for your hours in this situation, so any potential gain must be weighed against that.


Here is how such a model would function in real life:

  • Your income divided by the total number of hours you put in to make that income is the cost of your working hours (including commute time, etc)
  • The amount of money you could earn if you wanted to work during a specific amount of "free time" hours. This is based on the hourly rate you receive from your side business, which may differ from the hourly rate you receive from your regular employment.
  • You select the price for any remaining free time hours based on how much it would cost to get you away from your loved ones and your hobbies. Here, the sky's the limit: The value of that hour exceeds $200 if you would honestly refuse $200 to get an extra hour of sleep on a Saturday morning.

With this arrangement, you are in control of determining how many "free time" hours are offered at the rate your side business pays and how many hours are offered at surge price. That figure might be zero if you suffer from a chronic illness or lead a difficult life, and your time might just be "unpurchasable." This could suggest that you are willing to spend an extra $200 to return from your trip early so that you have time to unwind.

Obviously, not just how much money you want to spend, but also how much money you have, affects your financial decisions.

You have two options if you just cannot afford to hire a professional painter to paint your home but have free weekends coming up: invest your time painting your home, or put up with flaking paint. Money doesn't factor into anything if you don't have it.

Life is challenging. The mere fact that time and money are related does not automatically entitle you to exchange one for the other at a rate of your choosing. Speaking from personal experience as a previous freelancer, thinking about how much money you could be making every hour of the day is a certain way to burn out.

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