Why You Should Dollarize Your TimeAUTHOR: Francisco Sáez
Are you sure that reading this article is the best thing you can be doing in the next two or three minutes? There comes a time in everyone’s life where they realize that time is their most valuable asset. However, sometimes this epiphany comes too late for some people, when there’s no much time left to enjoy.
One way to begin to value your time properly is by assigning a monetary value to each hour of your work. This is sometimes called time dollarization, and it is especially important if you are an entrepreneur, a freelancer or, even working for others, you have considerable autonomy.
That value is just hypothetical, and need not necessarily to be what you are earning now; it may be what you should be earning or what someone who does the same as you usually earns (more on this below.) Even if you are embarking on a new adventure and making $0/hour, you must be aware of the hypothetical cost of your work hours to avoid wasting entire days doing things you should not be doing. Turning this hypothetical cost into something real as soon as possible is another story.
The economics of time
In any case, having a rough idea of what your time is worth—in economic terms—will help you make decisions with a significant impact on your personal productivity and the proportion of work/leisure hours in your life. If, for example, you consider one hour is worth $40, you will not hesitate a moment to hire a $15/hour assistant who can save you hours and hours of paperwork, and using a software that costs $10/month and saves you a few working hours will be a no-brainer.
When you know what your time is worth, you also know how bad it is wasting it. If you are reading a book you do not like, watching a boring movie or doing any activity—work or leisure—that doesn’t make much sense to you, you will realize it and will stop doing it.
A tip about indiscriminate consumption of information: When you are reading books, magazines, blogs, and the like, watching lectures or listening to podcasts, write down on paper whatever you can apply in your life, work, business, etc. If an information source does not produce notes—that is, does not generate value—, consider seriously unsubscribing, unfollowing or un-whatever.
If you don’t know the approximate value of your time, you will waste a lot of hours doing tasks that you should not. I know it does not seem a good idea to pay someone out of your pocket for something you could do yourself, but when you think not only about money but the money/time ratio, the economics change. Is it worth it to spend the entire Saturday morning cleaning your house when someone can do it for $12/hour so you could be spending that time doing more convenient things for you, your family, your career or your future? Is it worthwhile to attend a free 8-hour course from which you do not get any value?
How to put a price on your time
If you perform freelance work, you probably have an hourly rate you offer your customers. Even if you work with fixed-price contracts, you surely use an desired hourly earning to estimate the overall price of a contract or project. That amount is a good starting point.
If you are an entrepreneur, you are starting to run an SMB or, for whatever reason, you are still not charging for your work, you can look for information on what people who do more or less the same as you do charge or earn on average (there are many web sites that offer deals and show job demands indicating approximate hourly rates.)
If you have a salary, simply divide it by the amount of hours you work per year (the gross wage, including all additional benefits.)
And now what?
You already have an idea of how much your time is worth. The next step is to know how you are spending your time. You think you know it, but you don’t. Start to track your time, writing in a notebook how many hours you are spending each day on each activity that you consider important, or use a tool like RescueTime if you do most of your work in front of a computer.
Finally, write down all the ideas you have on how to:
- Increase the value of an hour of your time.
- Delegate or outsource tasks that don’t bring you any satisfaction, have a lower cost than your own cost, and can be performed by someone with better skills than you in that field.
- Minimize wasting time due to displacement issues, traffic, standing in a line somewhere, etc.
- Automate any kind of task (making payments, sending emails, posting tweets, etc.)