What would happen if someone asked you to divide your daily or weekly income into hours and determine what your time is worth? Would you be happy with the number or would you feel cheated? Knowing your own bottom line will help you to decide what extra jobs to pick up, what tasks you should hire out, and which ones you should be doing yourself.
Time and money – they both have value. Most people don’t have a clue what their working hours (or off-hours) are actually worth. It may sound surprising, but you won’t find the answer on your paystub, either. Here’s what you need to know about calculating how much your time is REALLY worth.
You’re Earning Less than You Think; Here’s Why:
Time Versus Money
Time and money often go hand in hand. It takes time to earn money but it also takes time to spend money. As humans, we’re all limited in the amount of time available within a given day; even our non-working hours are essentially valuable because you can never get those precious hours back.
Now, what exactly does that mean? You can – and should – think of every hour in your day as being valuable in some way. Some of those time blocks you need for self-care (hey, everyone needs to sleep, right?) but you choose where and how to use the rest.
How to Calculate What Your Time is Worth
So, what is your time worth? The first thing you need to do is calculate the number of hours per day you spend earning monthly. This isn’t just the number of hours you are clocked in, but the number of hours you spend during your commute.
Then, add on:
- Time you spend dropping the kids off at school or daycare
- Work-related stops you make along the way
- Unpaid hours you spend at home doing job-related tasks
- Time you spend on side-gigs or hustles
Total up the true number of hours you spend working on any given day and multiply that by the number of days per week you actually work. Add any weekend hours you work. Assuming you take two weeks of vacation per year, multiply your weekly number of hours by 50 to get your total.
Here’s an example:
Hours worked: 8
Days worked: 5
- 8 (hours per day) x 5 (days per week) = 40
- 40 (hours per week) x 50 = 2,000 (total)
Now, here’s the next step. Gather up all of your pay stubs and calculate your total annual salary. Take that number and divide it by the number of hours you work per week (40 in our example) and you’ll be able to assign a true value to an hour of your time.
Let’s say you realized you are technically working 60-hours per week and are earning an actual take-home salary of $40,000 per year. Take your 60 hours and multiply it by 50 weeks to get 3,000 total hours. A salary of $40,000 per year divided by 3,000 hours is approximately $13.33 per hour. That’s not so great when you consider you are probably being paid $20/hour for a 40-hour work week in the office.
But that’s really just the work side of things.
What about everything else?
Time Value and Your Life
Time is energy. Knowing the value of your time will shed a whole new light on how you spend your money. For example, do you want to pay a housekeeper $20/hour to clean your house when you are only earning $13? You’ll have to work twice as long as she does to pay for her hour. On the other hand, is it worth it to pay $20 to have someone mow your lawn or do your laundry if it means you can spend an extra hour playing with your kids this weekend?
The other question is whether or not those extra wasted hours are adding any value to your bottom line. What if you could cut some of your commute time out of each day and still earn the same annual salary? You can easily shift the value of your time by taking on work that pays more and takes less time to accomplish.
Here’s a hypothetical example. Let’s say you get two offers to write an article for two different newspapers. The first you can write in about an hour’s time at a base rate of $30 per hour. But you can write it from home, so the value of your hour is actually $30.
Newspaper two is willing to pay you $40 an hour for the article, which also will take you around an hour. But they want you to write at their office an hour away, rather than at home, and you can only come in on Fridays between 11 a.m. and 1 p.m. That’s the same time you usually spend watching your little one at home. This deal sounds better at first – until you factor in paying for gas and a babysitter.
The trick to improving your value per hour is to make sure you work paid hours, with as little time wasted without pay as possible. The less time you spend attempting to get to or get ready for work, the more you will actually earn. Look for higher paying gigs that don’t require a lot of wasted commute or research time and you can easily up your value and live a more fulfilled life.