2 min read

On the value of your time

On the value of your time

Regardless of how much money you have right now in your bank account or in your assets, that is an amount you are likely aware of. And this varies from person to person, and day to day, depending on your incoming/outgoing cashflows.

Time on the other hand is fixed, each of us has 24hrs of it per day. Jeff Bezos, me, you and a stranger on the street, we all have 24hrs. What could be the value of those 24hrs?

I was recently reading an article by Eunse Lee, who is having a look at the value of an hour of time from the perspective of a startup founder, but I think his concept could be applied on a larger scale.

[$1HrValueofYourTime] = [$HowMuchYouWantToMake@Exit] / [#HoursYouNeedToPutIn]

Firstly, let's have a look at the startup founder's perspective. To make calculations easier, let's skip the company ownership %-s and exit value of the company and possible applied taxes as those can all vary depending on your current situation and jurisdiction. Let's use the net, post-taxes real money you want to appear on your bank account.

Scenario 1: the 4-yr sprint to 20M
You want to exit with 20M USD and to get there you're putting in 15017.14hrs (12hrs a day, 6 days a week over 4 year period). In this case, 1hr value of your time would be 20 000 000 / 15 017.14 = 1 331.81 USD/hr.

Scenario 2: the 2-yr sprint to 400M
This is inspired by Kevin Systrom, based on Wikipedia and his Instagram exit terms in 2012. Let's say he was putting in 16hrs/day over each day in 2 year period, that makes 11 680 hours with a value of 400 000 000 / 11 680 = 34 246.57 USD/hr.

You can calculate your personal scenario and your value based on how many hours you are putting in and how much you want to make. And then use this as a reference guide for evaluating different opportunities coming on your way.

Now, if you are not a founder, you could modify this framework to fit your conditions to evaluate different other opportunities, may they be jobs with variable pay and hour requirements or something else.

In any case, you want to get it all down to one comparable metric, so that you could compare $/hr and $/hr.

The same way you compare groceries in the store, by looking at their $/kg or $/l values across different producers of the same kind of product.

I would modify this framework to fit the considerations if you consider doing something yourself or delegating/outsourcing the task to someone else or a product.

[$1HrValueofTime] = [$HowMuchYouWouldPayForProductOrService] / [#HoursYouNeedToPutInIfDoingYourself]

Paying 9 USD a month for app service, solving a problem which you could do yourself, but spending 9 hours on it, makes your value of time a mere 1 USD.  In this case, it is a no-brainer to pay for that service, even though in you could do it yourself, just it would be a bad use of your time, from the value perspective.

Paying 500 USD that saves just 10 minutes of your time might however be already a more complicated question, depending on how much you value your time - if your value of time is over 3 000USD/hr, that 500USD for saving 10 minutes is actually still a good deal.

Every hour you have in this life has value. It is up to you what you want to focus on and at what rate and select what other things to delegate.