The “Cost” of Your Time

A dear friend recently asked a personal finance-related question that has often plagued me: what is the cost of my time? Or, put another way, what is the value of my time?

This is a tricky question with an even less straight-forward answer than most personal finance questions. I could go with the age old “it depends.” And it does depend. It depends on what each individual person values and the resources that each individual person is working with.

Today, I’ll put aside the “it depends” cop-out and try to elucidate my thoughts on how to value time.

When saving money means spending time

This question came up within the context of my post about seeing Mad Max: Fury Road. We were able to save over 50% by seeing a matinee at an independent movie theater instead of a national chain. We didn’t actively price compare for this experience, we simply stumbled upon the savings out of a desire for a certain movie going experience.

But this is not always the case, and in many instances I actively price shop to determine where I can get the lowest price for a given good or event. As my friend pointed out, there is a real cost to price shopping, in the form of time spent doing this research and anxiety about getting the best possible deal. How much time is it worth spending to save $10? $100? $1,000? How do we balance time with money? Where do we draw the line?

This same conundrum crops up in the DIY realm as well. How much more is it reasonable to pay to have someone else re-tile your kitchen for you? $100? $1,000?

Apply the market value of your time

One way to approach answering the question of how to balance time spent with money saved is to use your “market value,” i.e. the hourly salary you command on the open market. For some people, this is easy to calculate. If you work for an employer who pays you $25 per hour, that is your hourly market rate. You can get into a lot of gray zones here if you work multiple jobs, are paid based on output not hours, or work unpaid overtime, but you get the idea. The world has an idea of what your time is worth (weather that number is fair or not is a different question), so you could use that number to evaluate how much time to spend trying to save money.

If your market rate is $25 per hour, then you’d ideally want to save $25 from an hours work. This means that if it takes you 1 hour to find a deal for $25 off your new toaster oven, you’ve paid for your time. If it would take you one hour to mow your lawn but you’d have to pay someone else $50 to do it, you’re better off mowing yourself. If, however, you only had to pay someone $25 to mow the lawn, either option would be equal in terms of the value of your time.

The tricky thing about this approach is that you can’t know when you start out searching online for a $25 savings if there is really a savings to be had. Chances are, if there are savings to be had, you’ll find them within the first five to ten minutes of searching. If you choose to spend an hour searching, it’s not like you’ll be rewarded for your hard work. The internet doesn’t care that you just spent an hour searching for a deal, the savings are either there or they aren’t. So spending an entire hour searching is almost certainly a waste of time.

The DIY side is also hard to evaluate because unless your time is REALLY valuable you are almost always going to pay more to have someone do work for you. Contractors of all kinds charge a huge premium for their connections, experience and labor pool. The same usually goes for landscapers, house cleaners, and on and on. Professionals are also just that, professional, so they’re likely to be able to work more quickly and efficiently than a lay person. How often do you accurately guess how long a DIY project will take? Basically never (is that just me?). Projects always take longer than expected, further skewing a market value of time analysis.

Other factors to consider: pleasure, quality and opportunity cost  

I would suggest that looking at the market value of your time isn’t usually the best option when it comes to determining how much time to spend in order to save money. I think you need to look at three key factors when determining how much time to spend searching for a deal or DIY-ing.

  1. Will I get any pleasure out of this? Will saving $20 on this concert ticket make me enjoy the show more? Will putting in the work to paint my walls make me happy? For some people, the answer to these questions might be yes. For others, no. Some people don’t enjoy their belongings unless they got a deal. Some people like the process of doing their own home repairs and maintenance.

When making a decision about how to spend your time, think about if it will bring you pleasure to spend your time in this way. If the answer is yes, go for it! Even if logically you know that searching for an hour to save $5 isn’t worth your time, if you enjoy the process then stick it out. But if the answer is no, find a compromise. I would suggest setting up a framework for yourself, such as “I will spend no more than 10 minutes trying to find a coupon for this blouse,” or “I will only read the first 10 Google search results to find a sale on shampoo.” Once you’ve set the framework, stick with it and know that whatever the outcome, you gave it a shot.

  1. Will the quality of the good or experience be impacted? By buying a product off of a discount website, am I forfeiting quality in terms of delivery or customer service? By installing a faucet by myself will I wind up with a leaky/malfunctioning sink? Maybe the answer to both of these questions is no, or maybe it is “yes, but it is still worth it to me to save money.”

Saving money today might seem great, but if it ends up costing you more down the right it might not be the best decision. I would suggest thinking through the pros and cons of each option in both the short and long term. For example, I know I’ll pay a little more to buy shoes from Zappos but I know that if the package gets stolen off my doorstep they’ll replace it. Similarly, I’ll pay more to have the light fixture installed by the professional but I know I won’t electrocute myself in the process of installing it. And it will work.

  1. What is the opportunity cost? If you didn’t spend your time searching for a deal or assembling your own furniture, how would you be spending your time? Would you be mindlessly watching TV without really thinking or enjoying yourself, or would you be sipping a glass of cold white wine while reading a book on the back patio, appreciating what a truly beautiful day it is?

A lot of the time we think of opportunity cost in terms of money (if I buy this for $10 then I can’t spend that $10 on something else), but you can also think about the opportunity cost of spending your time. If you spend an hour washing your car, that’s an hour that you didn’t spend writing super fun blog posts. This kind of goes back to point #1, understanding where you derive pleasure, and will surely be different for each person.

How do you value your time? Do you spend time searching for a deal or working on DIY projects?

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2 thoughts on “The “Cost” of Your Time

  1. Great post. I would think that the more you shop for deals the better you get at it ? Perhaps that translates in finding deals quicker and time is less of a factor?

    In terms of doing things yourself, I like to consider the skill I will learn by doing the task myself as added value. The learning experience makes it worth my time. However as you said one must be careful when considering all costs of doing something yourself.



    • That is a great point – I’m sure like any skill you get better at searching for deals with practice!

      A learning experience is a great reason to DIY. That is what I was trying to get at with the point about getting pleasure out of the activity. If you take pleasure in learning a new skill (which I certainly do!) then DIY-ing for learning’s sake can make a lot of sense.


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