Apr 062017
 

A New Way to Measure Your Success

There are varying degrees of success and many different ways to define it. For example, in order to be a successful frequent flyer, you will probably need a lot of connections. 😀 And if you’re trying to lose weight, success is all about mind over platter, and winning that Nobelly Prize. 😄

how much do you value your free time?

Financial success is often evaluated in terms of income or wealth. But I often argue that time is our most precious resource. Unlike money, all our days are numbered. So given this reality, perhaps the best way to evaluate our success is to find out how much we value our free time. 🙂 This can be done with the following steps.

  1. Think of an activity that is neither pleasant nor unpleasant to do for you. It also can’t help you gain skills or make you smarter.
  2. Determine the minimum amount of money you would charge to perform that service for 1 hour for a stranger.

This mental exercise will reveal how much you value your time at an hourly rate. 🙂 For example, services I can provide that I neither like nor dislike include slowly folding laundry and walking around town for no reason.

I would have gladly accepted $20/hour to fold laundry 10 years ago. But things have change now. I would not give up my free time for any amount less than $40/hour today, because I can offer valuable skilled labour. Furthermore, I’m 10 years closer to death so there has to be an added premium on the remaining time I have compared to the past me. Due to simple economics, the fewer days I have to live, the more valuable those days are to me.

In a way, $40/hour is an indicator of my level of success in society. Perhaps a doctor or lawyer would value their free time at $120/hour. This wouldn’t be surprising given their place on the social economic ladder. It is not only a measure of their immense human capital compared to mine, but also their financial status.

How the Value of Time is Tied To Success

As self sustaining adults, the value of our free time should be the lowest at the start of our careers. But over time this value should increase to keep up with our growing human capital. Over time our demand for time is increased, and demand for money is reduced because we can earn money easier and more quickly.

But measuring success based on the value of time has some drawbacks. It is based on our subjective perceptions. Maybe our labour is worth less in the free market than we think it does. The measurement also falls apart for the unemployed. For example, a retired grandma may want to fold laundry for as little as $5/hour. But that doesn’t necessarily mean she’s not successful in life. She probably just has nothing better to do since she’s retired and has free time 24/7.

Nevertheless, the hourly rate can be useful to encourage self development and determine relative success. 🙂 For example, let’s say our free time is worth $30/hour now. If this grows to $50/hour in a few years then we are probably going in the right direction in terms of our career and finances.

A Loophole Around Sensitive Financial Discussions

Lots of people are uncomfortable talking about money with friends. But when I ask my buddies about their free time hourly rate I usually get a candid response with no awkwardness. So perhaps this is a suitable way to discover people’s financial situations without directly asking them to disclose private information. For example, if your friends put a lower value on their free time than you, then it could mean they earn less money than you do.

So, how much is your free time worth? 😉

 

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12 Comments on "How to Determine the Value of Your Free Time"

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SmokingIsCoolAgain
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SmokingIsCoolAgain

I always enjoy this kind of thinking and it puts into perspective what is worth spending time on vs. what isn’t. I usually think of this from the other side where instead of thinking of a certain premium I would pay for my time, I think of expenses in terms of the work involved to offset it (usually for frivolous purchases so passive income is spoken for)

The same trend happens where something would have cost a day and a half of work when I was in my late teens compared to now where it the same purchase speaks for only 2 hours of work. The math shifts in the same way where working for a day and a half is not worth it but only for a couple hours is. Solid post!

Investing Pursuits
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This is a video about valuing time from people in the personal finance. For the reader’s, Jason Fieber has a new blog called mrfreeat33.com

Phil
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Phil

As self sustaining adults, the value of our free time should be the lowest at the start of our careers… funny, but I’ve always thought the opposite, my time early on was oh so valuable to setting up the life I have now… my time back then was oh so precious and honestly I would not give it up for anything except family, because family is family… But now, because I valued my time when I was younger, I can now provide my time to anyone who asks open and honestly for it, now that my time is freer, because our financial system chugs along with little input from me… maybe to the person who wants my time, its valuable, but for me, it’s just free. At some point, dollars and cents and value only get in the way of having a life and sharing smiles 😉 – Cheers

Stephen
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Interesting look on things. It’s hard to say for me where I’d value my time. For strangers they’d have to pay me a lot. But then I’d be really curious why they’re paying me so much and not some other stranger a lot less, so I probably would turn it down from paranoia…

Waking Up Slowly
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Waking Up Slowly
Great blog, I have read many of the post for a few weeks now. Gives a lot to think about! Valuing time is an interesting excercise which I have done a few times. I’ve also thought of the value of e.g. a sunny day – on holidays, the weather is extremely important and I could pay up to €400 a day for a perfect weather (as with poor weather the days might be a bit frustrating and already trips are expensive when both the paid costs and alternative cost are taken into consideration). However, lately I have started to contemplate whether I think of money too often. Is it really healty to think of things with $/€ value? Or should one just try to forget money often and concentrate more on the present moment etc. Maybe I am in the extreme end and have tought of money my whole life way too much, and starting to realise my obsession with money. One one hand, it has been beneficial to me as Im 28 years old and been financial free for a year now (I have made most of money from rental apartments which I own now 82, but before that… Read more »
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