September 22, 2009

Consider the Value of Your Time


I have noticed that people often make decisions that completely undervalue the worth of their time. Let's say you know of a gas station 10 miles away that sells gas for $0.10 less a gallon than your neighborhood gas mart. You think you're beating the system, but let's do a little math.

If you have a 15 gallon tank, you save $1.50 because of this expedition. Well done! However, this 10 extra miles each way takes up 20 minutes of your time. If you value an hour of your time for less than $4.50, you did well. If you're employed, I can't imagine this is true.

In everything you do, consider the value of your time.

7 comments:

Ryan said...

Eric, I thought you were into marketing, but now you are talking about hardcore economics...welcome to the darkside of numbers and no feeling or emotion

Eric Olsen said...

it's my favorite blend! marketing critical thought.

Braden said...

I think the same thing all the time. But I think most of the time that thinking is flawed. This only makes sense if you actually give up producing income (or future income)to go "save" money. Most of the time I wouldn't do something worth $1.50 during that time anyway. This thought assumes 100% productivity at your pay rate all the time.

Braden said...

I'm sure being self-employed makes this a bit more applicable.

Micah said...

Braden, you have a point but the principal is how do you value your free time? Is 20 minutes of your free time worth $1.50? My free time is worth more than my hourly wages. Thus, many employers pay higher rates for overtime. I also charge freelance clients nearly double the rate of my full-time job.

Eric Olsen said...

Being self-employed has definitely led me to this line of thinking. And you're right about it not being a completely fair comparison. But, would you rather spend 20 minutes with your family or save $1.50? Should we coupon cut for 45 minutes each week and go to 3 different stores to do the shopping and save $30, if I'm losing 3 hours in the process?

Braden said...

I agree with both points. Personally, I choose which argument to believe when one or the other may be more helpful in getting my way.