Is Your Money Worth Your Time?

Before we get into this, I understand that not everyone makes the same amount of money, and I’m not assuming that everyone makes $37,000 a year.  Below I will be using an example from census data to illustrate a broader point that is applicable regardless of your income.

According to 2010 United States census data on Wikipedia, the median income for an individual aged 25 or older, with “some college”, employed full-time is $37,135.  At 40 hours per week, this income level translates to roughly $17.85 per hour, and about $142.80 per day.  Considering these numbers, one can more efficiently budget his or her time, especially when concerning days off.

One thing that always fascinates me is the unwillingness of the average Joe to properly value his time.  A lot of people like to spout the catchphrase “Time Is Money” but so few people actually consider the meaning of the words.  Bill has “some college” and he’s a hard worker, and has always been a DIY type with regards to maintaining, repairing, and upgrading his home and vehicles.  Rather than paying someone else to do what he has the ability to do, he saves money by spending time.  The major issue with this practice is that sometimes, one’s time is worth more than one’s money.

A standard car oil change, for instance, probably takes Bill over an hour if we add up the time he takes to stop at the store for oil and a filter, digs out his oil drain pan, and readies the steel ramps so he can drive onto them and crawl underneath.  Also, add the time to dispose of the used oil, put everything away, and clean himself up.  At that point, he’s probably talking about well over an hour invested in all.  For the sake of a nice even number, if he makes the median income, then he just spent about $18 (worth of time).

He also had to buy the oil and filter.  On average, even the “cheap” oil costs over $3 per quart, so that’s $15 (on the low side) for an average car.  Add a $7 filter (thanks to a quick search on Autozone’s website), and now he’s at $22.  With the cost of his time, we’re talking about an oil change that costs $40.

Most people like Bill don’t consider the time invested in a particular task.  They see that they’ve just spent $22, and that’s less than the $27 Walmart charges for their cheapest oil change at the Tire & Lube Express.  But what’s really cheaper?  $27 or $40?  Shopping or running errands can be accomplished while the oil change is being performed, so that time isn’t wasted.


Cheapest Oil Change on Walmart.com

But for the sake of argument, let’s say the time spent during the oil change is a total loss.  Most of these places take around 15 minutes to change oil.  At $17.85 per hour, one’s time is worth $4.45 for those 15 minutes, and hey, just for kicks, we’ll add 15 minutes of “inconvenience time” to allow for getting off the interstate, parking the car, telling the attendant which service to perform, and getting back on the road when it’s all said and done.  Add that 30 minutes ($8.90 worth of time) to the $27 oil change, and the price is at $35.90.  Even wasting 15 minutes and allowing for a very generous 15 minutes to get in and out, it’s still cheaper for Bill to have someone else change his oil for $35.90 than to invest $40 between money and time for him to do it himself!

Anyone, regardless of how much you make, can determine, by looking at your income, what your time is worth.  The numbers don’t lie: If you make $37,135 a year, it isn’t worth your time to change your own oil.  It may or may not be worth your time to mow your own lawn, paint your own deck, or repair a leaky roof.  This analysis isn’t rocket science.  It doesn’t have to be to the penny.  The point is that through a quick calculation of (1) what your time is worth, (2) how much of your time a task might take, and (3) the cost of having a professional do the job quickly and correctly, anyone can save time and money.  And I didn’t even mention the hassle and headache from a tedious job, busted knuckles, achy back, and all the other things that any DIY guy or gal can tell you come with doing it yourself.

-J

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~ by hamiltonjacobs on December 20, 2013.

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