7 Steps to Figuring Out What Your Time's Truly Worth in Cold, Hard Cash
In today’s world, we tend to have enough on our plate so every available second is filled. Our time is our most precious limited, non-replaceable resource. There are a billion things to do, and all need to get done (or so we believe). We need a way to decide what to do next. But it’s not always clear how to make that choice.
At work, we can at least be guided by business goals. After all, time is money. But how about our free hours? There, time may be happiness. Or joy. Or friendship. Decide the highest value use of your time by using some easy metrics.
1. Give Each Option a Comparable Currency
You can’t compare apples to oranges. (Well, I can, but that’s due to a head injury I sustained as a small child.) Likewise, you can’t compare time that’s money with time that’s happiness. So put them into the same currency.
Measuring professional time is easy. Put it in terms of the money you’ll make. If someone’s willing to pay you, the rate they’re willing to pay is the value. For example, your job. You spend eight hours working each day, and get paid for those hours.
If what you do will eventually bring income, that time’s value is the eventual hourly rate. Of course, taking into account the extra hours you needed to make that dollar. If you’re a consultant looking for a contract, you spend time looking for that contract. If you spend four days to land a six-week gig that pays 500 bucks, you’re making $500 for six weeks and four days, which is $14/day. You need to raise your rates.
2. Email Is Not Your Friend
Email is particularly pernicious. People say, “I spend two hours a day doing email, but that’s OK, since I get business through email, and I once got a $5,000 contract via email.” Then they conclude that their 30 minutes of email checking brought in $5,000. Wrong!
If they check email two hours each day, that’s 25% of their work hours. If they get paid $80,000 a year, then that email time has to bring in at least 25% of that $80,000 or $20,000 in order to be paying for itself.
When valuing income-producing time, divide the income by the total amount of time—billable and not—that it took to get that business.
3. Turn Personal Time Into Money
Comparing paid time and personal time requires valuing your personal time in dollars, too.
Set your rate according to how you feel. What would you charge to miss something personal? That’s what your time is worth. Your friends Chris and Sam are going to see a movie, and you get offered a shift at work. What do you do?
Well, forget that it’s work. Pretend you’ve decided to join Chris and Sam. Your nemesis wants you to have no social life, but wants you to believe they have your best interests at heart. So your nemesis offers to pay you to stay home. How much do you need to get paid in order to be willing to forgo the time with Chris and Sam? $10? $50? $200? Whatever that number is, it’s the value you’re placing on that particular personal time.
4. Turn Exposure Into Money
A major modern currency is “exposure.” A well-funded or profitable company decides it wants to abandon capitalism and steal your skill and labor to make money for itself. Slavery is no longer legal, however, and they don’t believe in capitalism or paying people for their work, so they need to convince you to work for free. They offer you “exposure” and think they’re doing you a favor. Are they? Is it worth your time to work for “exposure?”
Convert the payoff to dollars. When you’re offered access or exposure instead of money, ask how much you would be willing to pay for the equivalent access. Let’s say the People’s Liberation Objectivist Paper (fondly knows as “PLOP”) offers you the chance to write an unpaid front-page article. Is that a good deal?
Ask yourself: If they hadn’t offered, how much would you be willing to pay to be on the front page of PLOP? Just asking that question immediately puts you in a new frame of mind. You start being picky. You ask how many people read the front page? Who are they? How long does the story stay live? How will they promote the story? How much will it raise (or lower!) your credibility to appear? The simple act of asking what you’d pay leads you immediately to ask a bunch of questions that you might not think to ask otherwise.
5. Your Reputation Is Valuable
When figuring out what you’d pay for exposure, make sure to consider its effect on your reputation (also known as “personal brand” in this modern era of internet exploitation). There’s a reason Lady Gaga gets paid $100,000 to attend a party: Her reputation gives the party higher status.
If you’re not Lady Gaga, however, it can work the other way: Accepting free exposure can damage your brand. (If you are Lady Gaga, love your work! Are you free next Thursday for lunch? I’ve always wanted to try Caravan of Dreams in the East Village. You can wear your meat dress, I’ll wear my eggplant suit, and we can exchange tips on how to keep our clothing fresh in unseasonably warm weather.)
Accepting less than what you’re worth sets a precedent, so factor the reputation effects into how you value exposure.
6. Use Expected Value
You’ve converted all your options into dollar amounts, but you’re not done. Each option is not equally likely. The people at PLOP say you’ll reach 100,000 people with your article. If that’s true, you’d happily pay $100 to appear on the front page. With a bit of research, however, you discover that PLOP doesn’t even show up in search results. You estimate the chances of reaching 100,000 people at 5%, which might still be high. So multiply the dollar value, $100, by the probability of 5%, to get $5 as the value of the time you’d spend writing PLOP.
(Using probabilities is covered in my podcast episodes on expected value.)
7. Your Gut Knows
When numbers fail, too, there’s always an old standby. Your gut. You’ve converted everything to one currency. You’ve calculated expected value. That’s all the rational stuff. It’s the raw material for your intuition. Now your intuition can evaluate factors taking into account all the unconscious factors that never see the light of day. For example, whether you’ll be miserable doing the high value thing, versus happy doing the “low” value thing. If your gut gives a different answer than your brain, you overlooked something. You gave time the wrong value or overlooked important pieces of currency. Go back and re-value your time, but correct your valuation based on the feedback from your gut.
Valuing our time is about making tradeoffs. Turn possible uses of time into dollar amounts. For personal time, ask what you’d have to be paid to give up that time. For exposure, ask what you would be willing to pay for the equivalent exposure. Then multiply by the probability that you’ll really get that payoff, and you have your dollar amount. Then always double-check with your gut. Time may be money, but it’s up to you to decide how much.
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This article was originally published on Quick and Dirty Tips. It has been republished here with permission.