Although the Time Value of Money may be one of the most important concepts to understand, and I have written plenty of posts on this topic, today I want to focus on the Money Value of Time. The Money Value of Time is a phrase that demonstrates the theoretical concept that there is a cost to participating in any activity – the thing is, is there a return?
Every person who earns an income has some hourly wage regardless of whether they are paid a salary, a straight commission, profit, bonuses, or any other type of compensation plan. We all have an hourly wage. Take a person’s annual income and divide it by the number of hours they work in a given year and you’ll come up with their hourly rate of pay – the Money Value of their Time. For example if you make $40,000 a year you make $16.67 an hour. If you make $100,000 a year you make $41.66 an hour. If you make $250,000 a year you make $104.17 an hour. That’s assuming a 50 hour work week. If you make $500,000 a year you make $208.33 an hour.
So hopefully you realize that anything that wastes your time is a waste of your money. So, if every hour of yours is worth anywhere between $16 and $208 an hour, anything that is wasting your time is a waste of your money and you really need to start looking at that. The cost of participating in any activity varies from person to person based on their income and how much time they spend on any given activity. Any time they’re spending on non-income producing activities has a negative impact on their ability to make more money because it is time they are not spending on things that do generate income assuming their pay is somehow tied to results. Like, waiting in line for that morning coffee at Starbucks has a cost, the time you spend folding laundry or mowing the lawn has a cost. Being on hold waiting for a customer service agent has a cost.
The Money Value of Time concept helps you understand that anything that wastes your time is a waste of your money. Even if it’s not in dollars – there is always the opportunity cost, that when you are doing one thing, you are not doing another more important thing that might bring in an income. So, the goal of knowing and calculating the Money Value of Time - of your time - is not necessarily to make you perpetually evaluate every single second of every day, it is more of an effort to demonstrate how many high performing people think about time compared to the average or low performing person.
On any given day, most people waste a tremendous amount of time. The average person spends one hour a day just looking for stuff. Many of us waste a good bit of time wondering around in semi-mindless meandering among infinite mounds of minutia. Truth be told, we are usually not even present to how much time passes before we finally wake up. We need to make the connection between time and how valuable it is and whether we waste it or invest it.
The more successful the person, the more intentional and protective they seem to be about their time. It’s not because they’re arrogant, evil, uptight or pompous, because they realize that time is one of the truly finite and limited resources. This understanding creates an otherwise unexplainable urgency for them to get things done – and not just at work. This line of thinking is not suggesting that you should be the most important thing in your life, but it should be a reality check that people who seem to get the most out of life are highly conscious, deliberately intentional and relentlessly protective of how they spend their time because they know there is a great cost. So, just reading this cost you something and I hopefully it turns out to be a worthwhile investment for you. So, there’s always a cost. The question is, are you mindful of the cost and are you calculating it carefully so that you don’t inadvertently end up spending too much.
If you don’t manage your time, somebody else is going to manage your time. Don’t let life just happen to you. Be very conscious of making sure that you have some control over it.
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